New Tax Reform Legislation.
On December 20th, the House and Senate passed new tax reform legislation that President Trump is expected to sign into law by the end of the week. Most of the changes in this bill will go into effect on January 1, 2018, and education will be essential in helping employees navigate the impact of it and update their Form W-4 accordingly.
Below is a summary provided by the National Association of Professional Employer Organizations (NAPEO) that we strongly recommend you share with your employees. Also, note that at this time the current W-4 will continue to be used, but we fully expect a change in the future as a result of the tax reform.
If you’re processing payroll internally and feel overwhelmed with the daunting task of remaining compliant while managing the level of administrative work this will take, Tandem HR may be just the solution you need!
Our electronic onboarding process equates to a smooth and straightforward processing, recording and documenting system for W-4s.
Tandem HR is a Chicago based and IRS Certified Professional Employer Organization (CPEO) assisting hundreds of small and mid-sized businesses with payroll, benefits, employee relations and risk management. Contact us today at 630.928.0510 or visit TandemHR.com for more information.
Valuable information to share with your employees today!
Summary of the Tax Reform Bill
- Increases the standard deduction in 2018 from $6,500 to $12,000 for a single filer and from $13,000 to $24,000 for a joint filer
- Increases the child tax credit from $1,000 (up to $1,000 refundable) per qualifying child to $2,000 (up to $1,400 refundable), and introduces a new $500 non-refundable “family” credit
- Limits the deductibility of state and local taxes to the first $10,000 paid for property or income taxes (or sales taxes instead of income taxes)
- Sets new individual tax rates effective January 1, 2018 (these individual tax rates changes sunset after 2025).
|Income Where Tax Rate Starts (2017) Single/Joint||Current Tax Rate||New |
|Income Where Tax Rate Starts (2018) Single/Joint|
|$0 / $0||10%||10%||$0 / $0|
|$9,326 / $18,651||15%||12%||$9,526 / $19,051|
|$37,951 / $75,901||25%||22%||$38,701 / $77,401|
|$91,901 / $153,101||28%||24%||$82,501 / $165,001|
|$191,651 / $233,351||33%||32%||$157,501 / $315,001|
|Mortgage Interest Deduction||Retained w/ modification (changes sunset after 2025)||Currently limited to first $1 million in mortgages;
going forward limited to first $750,000 (new mortgages); deduction for interest on home equity loans is suspended
|Death Tax||Retained w/ modification (changes sunsets after 2025)||Doubles the basic exclusion amount
from $5 million to $10 million
|Medical Expense Deduction||Retained w/ modification||Deduction is available for expenses exceeding 7.5% of AGI in 2017 and 2018
(a 10% AGI threshold applies in 2019 and beyond)
|Student Loan Interest Deduction||Retained||Student loan interest remains deductible
up to $2,500 per year
|Graduate Student Tuition Waivers||Remains Tax Free|
|Individual Mandate||Retained until 2019||Reduces penalty to $0 for individual mandate beginning in 2019|