Dec. 2017 - Highlights from the Tax Overhaul

Congress has passed the much anticipated overhaul of the federal income tax code.1 Here we highlight the changes most relevant to individual investors. We will assess additional implications in coming months.

  • Seven income tax brackets remain but rates are reduced. The new rates, with associated thresholds, are as follows:

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  • The standard deduction is almost doubled, to $12,000 for single filers and to $24,000 for married couples filing jointly.

  • The personal exemption has been eliminated.

  • The combined deduction for state and local property, income and sales taxes is capped at $10,000. This write-off was previously unlimited.

  • The child tax credit is doubled, to $2,000, for children under 17 and the income threshold for claiming the full credit is increased to $400,000 for married couples (up from $110,000 today) and $200,000 for single parents (up from $75,000).

  • For taxpayers taking new mortgages on a first or second home, interest will be deductible on debt up to $750,000, down from $1 million today.
  • The Alternative Minimum Tax (AMT) survived, but fewer filers will be ensnared: the income exemption levels rise to $70,300 for singles and to $109,400 for married couples.

  • The estate tax exemption has been doubled, to $11.2 million for individuals and to $22.4 million per couple for 2018, and will be indexed to inflation. The “step up” in cost basis for inherited assets has been preserved.

  • The “chained CPI” will be used to measure inflation when adjusting future deductions, credits and exemptions.

Several provisions that would have had significant impact on investors were dropped:

  • Investors will not be required to use “first in, first out” accounting when calculating gains on shares sold; the flexibility to designate specific shares will be retained.

  • Lower limits on deductible contributions to defined contribution retirement plans were not adopted.

  • Home sellers can continue to exclude from taxes $250,000 of profit on a primary home ($500,000 for married couples) if the seller has lived there for two of the previous five years.

  • The deduction for charitable contributions has been retained for those who continue to itemize deductions.

 To read more, subscribe to the Investment Guide. If you are a current subscriber, you will see Dowload and View buttons on the bottom of the page to access the entire issue.

Also In This Issue:
Catchphrase Investing
Should I Buy Bitcoin?
Blockchain:  Changes Coming to Wall Street?
The High Yield Dow Investment Strategy
Recent Market Statistics
Dow Jones Industrials Ranked By Yield
Asset Class Investment Vehicles

Congress has passed the much anticipated overhaul of the federal income tax code.1 Here we highlight the changes most relevant to individual investors. We will assess additional implications in coming months.

  • Seven income tax brackets remain but rates are reduced. The new rates, with associated thresholds, are as follows:

Capture

  • The standard deduction is almost doubled, to $12,000 for single filers and to $24,000 for married couples filing jointly.

  • The personal exemption has been eliminated.

  • The combined deduction for state and local property, income and sales taxes is capped at $10,000. This write-off was previously unlimited.

  • The child tax credit is doubled, to $2,000, for children under 17 and the income threshold for claiming the full credit is increased to $400,000 for married couples (up from $110,000 today) and $200,000 for single parents (up from $75,000).

  • For taxpayers taking new mortgages on a first or second home, interest will be deductible on debt up to $750,000, down from $1 million today.
  • The Alternative Minimum Tax (AMT) survived, but fewer filers will be ensnared: the income exemption levels rise to $70,300 for singles and to $109,400 for married couples.

  • The estate tax exemption has been doubled, to $11.2 million for individuals and to $22.4 million per couple for 2018, and will be indexed to inflation. The “step up” in cost basis for inherited assets has been preserved.

  • The “chained CPI” will be used to measure inflation when adjusting future deductions, credits and exemptions.

Several provisions that would have had significant impact on investors were dropped:

  • Investors will not be required to use “first in, first out” accounting when calculating gains on shares sold; the flexibility to designate specific shares will be retained.

  • Lower limits on deductible contributions to defined contribution retirement plans were not adopted.

  • Home sellers can continue to exclude from taxes $250,000 of profit on a primary home ($500,000 for married couples) if the seller has lived there for two of the previous five years.

  • The deduction for charitable contributions has been retained for those who continue to itemize deductions.

 To read more, subscribe to the Investment Guide. If you are a current subscriber, you will see Dowload and View buttons on the bottom of the page to access the entire issue.

Also In This Issue:
Catchphrase Investing
Should I Buy Bitcoin?
Blockchain:  Changes Coming to Wall Street?
The High Yield Dow Investment Strategy
Recent Market Statistics
Dow Jones Industrials Ranked By Yield
Asset Class Investment Vehicles

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Created Date: 12-28-2017
Last Updated Date: 12-28-2017
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