There is no doubt that the Tax Cuts and Jobs Act of 2017 will have a significant impact on nearly every taxpayer. To begin, there are many changes in the individual income tax rates as noted below.
Your so-called “ordinary” income (e.g., compensation, interest income, most retirement income, and net short-term capital gains) is taxed at increasing tax rates that apply to different ranges of income. Starting in 2018, although the New Law retains seven ordinary income tax brackets, it changes the rates as follows: 10%, 12%, 22%, 24%, 32%, 35%, and 37%.
Although the New Law lowers the actual tax rates at most income levels (regardless of filing status), determining the overall tax impact on a particular individual or family as compared to prior law will vary due to other changes in the New Law, such as: an increase in the standard deduction, loss of personal and dependency exemptions, the elimination or limitation of certain itemized deductions, increases in the child tax credit, higher income phase-outs for the child credit, a new credit for certain qualifying dependents, and others.
To view the full white paper outlining several tax planning tips for individual taxpayers please click here.
If you need assistance sorting through the new tax law to determine how it will affect your personal situation call our office at (802) 878-1963 (Williston) or (802) 775-7132 (Rutland). Davis & Hodgdon Associates CPAs has been assisting Vermont individuals and business owners with tax planning and retirement planning for more than 25 years.