Last week, the City of Rockford presented awards to several employees who have celebrated milestones in their time spent working for Rockford. We are very fortunate that we have experienced people who have decided to remain in our beautiful community serving all of us residents. This says good things about our system here. The administrators, Chief Dave Jones, Jamie Davies, and now City Manager Thad Beard, are adept at hiring the right people. The system they have set up allows the people they hire to operate, grow, and mature professionally within that system and now several of them deserve to be recognized. Dan Apkarian, who is currently serving in Afghanistan, celebrated 5 years. Ian Graham celebrated 10 years. Casey Bennett, Jeff Hernandez, Aaron Sawyer, and Jason Bradley celebrated 15 years and Phil Vincent celebrated 20 years. These fellows deserve our thanks and our congratulations on jobs well done and done well over long periods of time.
Now that Congress has passed and signed the Tax Cuts and Job Act, a tax law that is 1000 plus pages, let’s take a look at a few of the more interesting provisions. “Interesting “ to me, means the provisions that will affect the most individual taxpayers in the actual preparation of their tax returns. In affect, however, because one of main provisions lowers the corporate tax rate from a top rate of 35% down to 22%, we will all be affected by the Tax Cuts and Job Act. The people in Congress are betting that lowering the corporate tax rate will allow corporations to pass on those savings to employees, customers, and shareholders. It’s a gamble that we will have to wait and see if they are right. I’m hoping so. Let’s take a look at the individual provisions that affect the most taxpayers.
First, the standard deduction for all taxpayers has increased for all taxpayers. Single taxpayers’ standard deduction will increase from $6,350 up to $12,000. Head of household filers’ standard deduction will go from $9,350 up to $18,000. Married filing joint filers’ standard deduction will increase from $12,700 up to $24,000. The additional amounts for being 65 or older of $1,250 or $1,550 will remain in place from current law. These increased standard deduction amounts will allow a projected 30 million taxpayers to no longer have to file a Schedule A, Itemized Deductions form. This will result in tax savings for most of the 30 million taxpayers.
Second, the exemption amount of $4,050 for each taxpayer and each dependent has been eliminated. That does mean that the increase in standard deduction amounts from the first section is reduced by the loss of the exemption amount. There is a break-even point at which taxpayers with more than one child might very well have been better off under the old rules. Taxpayers with no children would be better off under the new system. Because of the fact that there are a lot of voters, I mean taxpayers, with more than one child and many of them would be dis-advantaged by losing the exemption amount, an adjustment was made to the Child Tax Credit. Senator Rubio threatened to withhold his vote until this particular provision was added.
Third, therefore, the Child Tax Credit was increased from $1,000 up to $2,000. Up to $1,400 of the credit will be refundable. Bottom line, taxpayers with more than one child will predominantly be better off under the Tax Cuts and Job Act because of this increase. In addition, a $500 non-refundable credit will be added for dependents who are not a qualifying child. Examples of these dependents would be a parent or a disabled adult child. Another nuance was added in that the income at which the credit is phased out was increased from $110,000 up to $400,000 for joint filers and from $75,000 up to $200,000 for single taxpayers. This will also allow
Fourth, six of the seven tax brackets were adjusted downward. The first bracket, 10%, remained the same. The 15% bracket is now basically the 12% bracket. Each subsequent upward bracket was adjusted downward all the way up to the 39.6% bracket that is now the 37% bracket. This downward adjustment will result in new tax bracket per old tax bracket tax savings for all taxpayers. There are 500 plus pages of examples as I itemized in these four items. There are winners and there are losers but according to the Congressional Budge Office, ultimately over the next 10 years, there will be 1.5 trillion dollars worth of winners. It will be an interesting 10 years! Now, I wish each of you a Happy New Years and a wonderful 2018! This is Jerry Coon signing off for 2017.
Jerry Coon is an Enrolled Agent.
He owns Action Tax Service on Northland Dr in Rockford.
Contact Jerry at www.actiontaxservice.com