The GOP's much-anticipated tax reform legislation is finally approaching the light at the end of the tunnel. The House Ways and Means Committee has just released a draft of the "Tax Cuts and Jobs Act." Here are some of the most outstanding winners and losers of the new tax legislation.

Winner: The standard deduction

Taxpayers have long had the option of subtracting either a standard deduction or a set of itemized deductions from their income before calculating their tax bill. For 2017, the standard deduction was $6,350 for single or married filing separately taxpayers, $9,350 for heads of household, and $12,700 for married filing jointly. The Tax Cuts and Jobs Act nearly doubles the standard deduction to $12,000 for single filers and $24,000 for joint filers. Single filers with at least one qualifying child get a special standard deduction of $18,000. The standard deduction will continue to be adjusted for inflation each year.

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Loser: Personal exemptions

The existing tax code allows taxpayers to deduct a "personal exemption" for themselves and for any dependents. For 2017, the personal exemption was $4,050 per person. Thus, a couple with two dependent children could subtract four personal exemptions, for a total of $16,200. Personal exemptions phased out over certain income ranges for high-income taxpayers.

The new tax reform legislation completely eliminates personal exemptions. Taxpayer exemptions are being replaced by the larger standard deduction, while dependent exemptions are being replaced by new and expanded family tax credits (see the next section for more on this).

Winner: The Child Tax Credit

The Child Tax Credit currently allows taxpayers with qualifying children to claim a credit of $1,000 per child. The credit phases out at certain income levels, disappearing completely for high-income taxpayers. The Child Tax Credit is also partially refundable, meaning that you can claim it even if the credit exceeds your federal tax bill. The refundable portion of this credit is 15% of the taxpayer's earned income for the year that's greater than $3,000. For example, a taxpayer who earned $20,000 could have a refundable Child Tax Credit of up to $2,550.

The new Child Tax Credit will be increased to $1,600 per child, though the refundable portion of the credit will still be limited to $1,000 per child. The income limit phaseouts for this credit will also be significantly increased. For example, the Child Tax Credit currently starts to phase out at $110,000 of income for joint filers; under the new legislation, the phaseout begins at $230,000 for joint filers.

The Tax Cuts and Jobs Act allows taxpayers to substitute a $300 credit for non-child dependents in place of the Child Tax Credit. It also introduces a "family flexibility credit" of $300 for persons listed on the return who are neither children nor non-child dependents. For example, the taxpayer's spouse would be eligible for this credit. The family flexibility credit and non-child dependent credit are temporary tax credits available only until the end of 2022, unless Congress decides to extend them at that point.

Loser: Numerous itemized deductions

Given the newly increased standard deduction, it's likely that fewer taxpayers would be itemizing under the new legislation. That's just as well, since several of the biggest itemized deductions have been reduced or repealed in the Tax Cuts and Jobs Act.

The mortgage interest deduction will remain, but is now limited to loans of up to $500,000 (the old deduction was limited to loans of up to $1 million). Mortgage interest will also now be deductible only on the taxpayer's primary residence.

The personal casualty and theft loss deduction has been repealed in the new legislation, with the exception of casualty losses associated with special disaster relief legislation. The medical expense deduction and the tax preparation fee deduction have been completely repealed, as have the alimony deduction and the moving expense deduction. Deductions for contributions to medical savings accounts have been repealed, but HSA contribution deductions are still permitted.

The state and local tax deduction (SALT) has been substantially reduced in the new legislation. Instead of being permitted to deduct either state income taxes or state sales taxes, individual taxpayers can now only deduct sales taxes. Property tax deductions are still allowed up to a maximum of $10,000.

When do the changes take effect?

Assuming that the Tax Cuts and Jobs Act passes in its current form, the new tax rules will take effect starting in 2018. That means that when you do your 2017 taxes, you'll continue to use the old rules regarding deductions, exemptions, and so on. When you prepare your 2018 taxes in early 2019, you will switch over to the new tax rules at that time.

The GOP has set an ambitious goal of passing tax reform legislation before Thanksgiving. However, it's likely that there will be a great deal of horsetrading and compromising to get this legislation passed through both houses, especially on such a tight schedule. Thus, you can assume that at least some aspects of the tax reform legislation will be changed or even removed in the final version. In short, if your favorite tax break has gotten the axe, don't panic – it's possible it will be resurrected before this tax legislation becomes law.

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