The Tax Cuts and Jobs Act is the most significant set of changes to the U.S. tax code in several decades. The vast majority of the changes go into effect for the 2018 tax year, which is the return that you’ll file with the IRS in the spring of 2019.
Here’s a rundown of what Americans need to know about the recent tax changes that could affect individual taxpayers in the upcoming tax season. Changes made on the corporate side won’t affect your tax return, so we’ll focus on the individual filer. These changes, which are mandated by the new tax legislation for individual filers, are set to expire in 2025, unless they get extended. (Corporate changes made by the bill are permanent.)
Tax brackets — Still seven, but with different rates
One of the headline changes made by the Tax Cuts and Jobs Act was a general lowering of U.S. tax rates. While the number of tax brackets remained at seven, the rates were generally lowered, with the exception of the minimum tax rate staying at 10% for the poorest Americans.
In addition to lower tax rates, the income thresholds were increased, particularly at the higher tax brackets. In other words, the highest tax brackets now apply to fewer (higher-earning) Americans than it did previously. For example, before the passage of the Tax Cuts and Jobs Act, the top tax rate was 39.6% and applied to married couples filing jointly who earned more than $480,050. With tax reform, that top rate was lowered to 37% and only applies to married couples making more than $600,000 in taxable income, much more income than before.
| Former Marginal Tax Rates (2017 and Prior Years) | New Marginal Tax Rates (2018-2025 Tax Years) |
|---|---|
| 10% | 10% |
| 15% | 12% |
| 25% | 22% |
| 28% | 24% |
| 33% | 32% |
| 35% | 35% |
| 39.6% | 37% |
DATA SOURCE: IRS
Interested in reading more about tax law changes in 2019? View the full article here or contact when of our Tax Law Experts at (608) 233-9769
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