Donald Trump has delivered on one campaign promise, and that was to overhaul the United States Tax Code. The revisions, which go to over 1,100 pages, are densely worded legalese but a few key provisions are clear enough.

Overview

It was Trump’s goal to simplify the tax code to make filing tax returns easier. He (and Congress) did this in two main ways. First they reduced the tax brackets from five to four, also reducing the marginal tax rates within those brackets. Secondly, the standard deductions have almost doubled, from $15,000 to $24,000 for a married couple. The personal exemption of $4,050 per person has been eliminated. The effect of this will be to make it less advantageous for many people who previously itemized their deductions to do so in the future. That, of course, will simplify the filing as many of the schedules associated with itemization of deductions will no longer be necessary.

Deductions and Exemptions

As noted above, the biggest change, in terms of application to the most taxpayers, is the increase in the standard deduction. Changes to existing deductions and exemptions are also designed to drive taxpayers to the standard deduction. For example, the mortgage interest deduction is lowered to interest on the first $750,000 of a mortgage loan used to acquire, build or improve a primary or one secondary home. This is down from $1,000,000. Additionally, interest on home equity loans is deductible only if the loan was used to buy, build or improve your home. A home equity loan taken out to purchase a boat or pay for a vacation or anything unrelated to the home itself no longer qualifies for the mortgage interest deduction. The deduction for state and local taxes paid is also reduced to a total of $10,000. This includes state and local income and property taxes. Property tax paid on property used in a business is not part of the $10,000 limitation.

Child Tax Credit and Alimony

The Child Tax Credit is increased from $1,000 to $2,000, and the income level at which it begins to phase out is raised, meaning more people will be able to claim the Child Tax Credit. Alimony payments will no longer be deductible to the payer, nor will the payments be taxable to the recipient. The effect is to shift the tax burden from the recipient of alimony to the payer. This applies to divorces or modifications entered into after December 31, 2018.

The effects of the new tax law will be highly personal depending on each person’s situation.  As with any changes to tax laws, you should contact a professional adviser with respect to your individual situation.