A look at what’s different in the new tax laws
Jacklin Youssef points out specific adjustments for individual tax brackets and deductions and notes that a number of changes will expire in 2025 if the rules aren’t extended.
Other highlights from this webcast
- The new rules’ effect on estate and gift taxes
- What tax reform means for your investment portfolio
- Roth conversions under the recent rules
Talli Sperry: So this one is from Gail in Carmichael, California. Thank you, Gail. And she’s asking, “What’s different this year?”
Jacklin Youssef: That’s a great question to start. We definitely had a lot of changes based on the new tax rules that were passed on December 22. This is essentially considered more of the far-reaching rules that we’ve had in changes over the last 30 years, because it does cover a lot of changes to the individual income tax side, to trust and estate, to small business owners, as well as the corporate tax side. So because of the magnitude of the changes, that’s why we believe, again, that this is considered to be sweeping changes.
If we look and focus on the provisions that are pretty much related to the individual taxpayers, we’ll recognize that a number of those are set to expire at the end of 2025. And what that, in a sense, really means, it means that those will essentially revert back to what the tax rules looked like before the rules were effective in 2018. So we’ll, essentially, just see some sort of changes, unless, of course, Congress were to go back and extend these tax rules.
Talli Sperry: So it would look like 2017 did?
Jacklin Youssef: Exactly, right.
Talli Sperry: Okay, important to know.
Jacklin Youssef: We want to maybe point to specific areas as to what some of the changes were, and we’re looking at the individual income tax side of things. So we’ll recognize that the marginal tax brackets were lowered, so we do have a chart up on the screen that will essentially just go back and take a look at what the tax brackets look like for individual investors. Those, essentially, will be progressing from 10% all the way up to the highest bracket of 37%.
Other changes really include looking at the standard deduction and how those were expanded and almost doubled, so that’s a little different than what we had before the new tax rules.
There’s been a repeal of the personal exemptions, which, in a combination of these two areas, will drive a lot of our clients to making decisions around whether it would behoove them to itemize their deductions or not itemize their deductions. And I also have another chart that we can probably bring up on the screen as well that will highlight the number of the different rules around some of those itemized deductions that we’ll probably converse about a little bit more throughout the rest of the webcast.
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