2017 Tax Reform: Checkpoint Special Study on Individual Tax Changes in the Tax Cuts and Jobs Act
Updated December 22, 2017
On December 22, President Trump signed into law H.R. 1, the “Tax Cuts and Jobs Act,” a sweeping tax reform law that promises to entirely change the tax landscape.
While the final version of the legislation carries the title “An Act to provide for reconciliation pursuant to titles II and V of the concurrent resolution on the budget for fiscal year 2018,” this special report refers to the Act by its former and commonly used name: The “Tax Cuts and Jobs Act.”
The bill has taken shape at breakneck pace over the past two months, making it difficult for even seasoned tax practitioners to know exactly where things stand. The bill itself is massive and contains many tax law changes, some of which are extremely complex, and many of which go into effect in a matter of weeks.
This special report explains the changes that affect the taxation of individuals. In addition to providing a summary of the changes, it also clearly sets out the effective dates (which in many cases include an expiration date, or "sunset"), the Code section(s) affected, the bill's section number, and a recitation of prior law to put the amendment into context.
This information will help practitioners prepare for the year ahead, which will likely include squeezing in last-minute tax planning moves in 2017 to take advantage of provisions still on the books that won't be available next year. For example, a taxpayer who will itemize in 2017 but will likely be taking the larger standard deduction next year may benefit from making charitable contributions this year instead of next and from accelerating certain discretionary medical expenses into this year, for which a retroactively lower "floor" limiting medical expense deductions is in effect. In many cases, 2017 itemizing taxpayers should pay all of 2017 state and local taxes ("SALT") this year (even if the due date for the last installment is in 2018) and consider making prepayments (e.g., of property taxes) in light of the significant reduction in the SALT deduction going into effect next year. Many taxpayers should also consider ways of deferring income to take advantage of the lower rates going into effect next year.
This report sets out all of these changes, as well as many others including dramatic changes to the tax treatment of alimony and a new rule that disallows the use of a recharacterization to unwind Roth IRA conversions.