The GOP tax plan claims that middle-class families in our nation will get more tax breaks in 2018.
However, there are many controversies about the new passed Tax Cuts and Jobs Act (TCJA). Well, every new change has some good and bad sides. In this article, I will show you the good sides of the new tax bill and its impact on the people in our nation.
According to the previous Tax Law, the limit was higher - $1 million and $500,000.Note: Current homeowners (Who took out a mortgage loan on or after Dec. 15, 2017) would not be affected by the new tax rule.
As per the new Tax Law, interest on home equity loan is not any more deductible. However, in the past, taxpayers got the deduction on the home equity loan up to $100,000 or $50,000 for couples (Filing separately).
Previously, the taxpayer used to get the deduction on HELOCs up to $100,000 or $50,000 for couples (Filing separately).Note: The New Tax Law will expire on 1st January 2026.
Remember, you will be able to claim the greater mortgage interest deduction or the deductions for other home equity debt interest only on your 2017 tax return, not anymore.
The Child Tax Credit Act has planned to help families with dependents. Previously, it offered the money back to the taxpayers for each qualifying child in the household. The age of the child had to be under 17, which is still the same. However, higher earning families were not included in this benefit. The credit phase-out was $75,000 (AGI) for single filers and $110,000 for couples filing jointly.
The new tax law is providing medical expenses deduction for middle-class people in the USA.
As per the old rule, the medical expenses for the year had to surpass 10% of a person's AGI. Now the threshold is 7.5%.
Note: This change will expire after the current tax year 2018.
As per the new tax Cuts and Jobs Act, there are slight changes in the tax deductions for people who are paying their student loan and saving for education.
As per the prior tax rule, the income from the cancellation of debt was subject to tax.
The new rule allows certain qualifying students to exclude cancellation of student loan debt from their income.
If a student wants to qualify for it, then:“the loan must have a provision that states that part of the debt will be canceled if the student works:
However, most of the old rules are same.
Lastly, though the GOP claims that the new tax law is offering great tax cuts for the middle-class families and it is simplifying the tax process, yet there are many controversies.Critics are saying that the new tax law is temporary; most personal tax provisions in the bill will expire by 2026. Thus, the middle-class taxpayers will experience a tax hike after a certain time due to the effect of inflation.
Tax law modifies time to time; it can be difficult to understand how the tax reform changes will affect you. So, it is recommended to use a tax reform calculator or seek advice from a tax professional.