Congress just passed the biggest rewrite of tax laws in more than 30 years. The bill now makes its way to President Donald Trump, who is expected to sign it into law.
While the new laws won't affect how we file our 2017 tax returns, the IRS says new tax brackets could be ready as early as February, meaning many of us could see changes in our take-home pay very soon.
Here's what else to expect from the new legislation.
1. New tax brackets
- 10 percent: Individuals earning up to $9,525 and married couples filing jointly who make up to $19,050 remain in this bracket.
- 12 percent: This includes individuals making up to $38,700 and married couples who earn up to $77,400.
- 22 percent: This includes individuals making up to $82,500 and married couples who earn up to $165,000.
- 24 percent: This includes individuals making up to $157,500 and married couples who earn up to $315,000.
- 32 percent: This includes individuals making up to $200,000 and married couples who earn up to $400,000.
- 35 percent: This includes individuals making up to $500,000 and married couples who earn up to $600,000.
- 37 percent: This includes individuals making more than $500,000 and married couples who earn more than $600,000.
These changes will likely lower your tax burden in 2018—though there's a catch: The new tax brackets are set to expire, and revert to 2017's rates, after December 31, 2025.
2. Higher standard deductions
The standard deduction nearly doubles from $6,350 to $12,000 for individuals and from $12,700 to $24,000 for married couples filing jointly. This change is also set to expire in 2025.
3. Greater tax credits for dependents
Under the new bill (through 2025), the child tax credit increases from $1,000 to $2,000 for each child under 17, and parents can receive the first $1,400 as a refund.
Currently, to claim the full credit, single parents must earn less than $75,000, and married couples filing jointly must earn less than $110,000. This expands to include single parents earning up to $200,000 married couples earning up to $400,000.
4. Itemized deduction changes
The rules for many personal itemized deductions will change under the new tax code. For example, it'll allow a $10,000 deduction for any combination of state, local and property taxes. This was likely a last-minute concession to appease lawmakers in high-tax states, like New York and California; a previous version of the tax bill eliminated deductions for state and local income taxes entirely.
Also spared from the chopping block: a $2,500 annual deduction for student loan interest paid and another for medical expenses. In 2018 and 2019, you can deduct medical expenses exceeding 7.5 percent of your income. After that, the threshold bumps up to 10 percent.
Other deductions, like for moving expenses and professional tax prep, will be eliminated.
5. Mortgage interest deduction limits
While the mortgage interest deduction will stay the same for current homeowners, it will be capped at $750,000 (down from $1 million) for purchases made after December 15, 2017. So, for new mortgages, homeowners would only be able to deduct interest payments made on their first $750,000 worth of home loans.
6. No health care mandate
The final GOP bill eliminates the tax penalty for not having health insurance. If you get insurance through your employer, this doesn't directly affect you. However, any instability in the market makes insurers more likely to raise rates for everyone.
7. No change for 401(k)s
Rumblings about severely limiting how much we can contribute to 401(k) plans have officially been put to rest, and retirement savers can expect no changes to affect their nest eggs on this front. (Another positive development: The IRS just boosted the contribution limit for 2018 from $18,000 to $18,500 for those under 50.)
This story was updated on December 20, 2017.