After successfully reconciling different bills passed by the House of Representatives and Senate, respectively, Congress has passed the Tax Cuts and Jobs Act of 2017. It's the first major rewrite of the U.S. tax scheme in over 30 years, and it's packed with changes that could have an impact on your financial planning. Here are some of the biggest changes and how they may affect you.
Housing deductions drop for some
Up until now, you could claim your mortgage interest on home loans up to $1 million as a deduction. Not anymore. Beginning in 2018, interest on home loans exceeding $750,000 will no longer be deductible. Existing home loans will be grandfathered, if they were closed on before Dec. 15, 2017.

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The act eliminates deductibility for interest on home equity loans and lines of credit, too. Therefore, you'll no longer be able to deduct interest on those loans if you tap your home equity to consolidate debt or make a big purchase.
State and local tax changes will affect many
The law also makes big changes on how much you can deduct in state and local taxes. Previously, you could deduct town and state taxes associated with things like income taxes, property taxes, and sales taxes. That's not necessarily the case anymore. The act caps your state and local deduction at $10,000.
The standard deduction becomes... "the standard"
To make up for eliminating many of your itemized deduction, the act doubles the standard deduction to $12,000 if you're single or to $24,000 if you're married. In many cases, you'll discover that you no longer need to bother with itemized deductions at all.
Also, the act expands the child tax credit from $1,000 to $2,000 and increases the phaseout of this credit from $110,000 to $400,000 for married couples. The first $1,400 in child tax credits is refundable, too. Remember, this is a below-the-line tax credit, so it directly reduces how much you owe in taxes.

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Dropping income tax rates
It's likely that your income tax rate is heading lower next year. The act keeps the seven tax brackets, but it changes the rates and the incomes that those brackets apply to. The following table shows you how 2018 federal income tax rates compare to the 2017 rates.
Bracket Under Current Law |
Applies to These Incomes: |
Bracket Under New Law |
Applies to These Incomes: |
---|---|---|---|
10% |
$0-$19,050 |
10% |
$0-$19,050 |
15% |
$19,050-$77,400 |
12% |
$19,050-$77,400 |
25% |
$77,400-$156,150 |
22% |
$77,400-$165,000 |
28% |
$156,150-$237,950 |
24% |
$165,000-$315,000 |
33% |
$237,950-$424,950 |
32% |
$315,000-$400,000 |
35% |
$424,950-$480,050 |
35% |
$400,000-$600,000 |
39.6% |
$480,050 |
37% |
$600,000+ |
Data source: Tax Foundation. Married filing jointly.
Because of the changes, your employer will adjust your withholding next year, so you should see a small increase in your take-home paycheck soon.
Company income rates drop
If you own a company, then you'll stand to benefit from a significant decline in the corporate tax rate next year. Currently, the corporate tax rate is 35%, but it will drop to 21% next year. The cut in rates is designed to help small businesses, too. If you report your business profits as personal income on your tax return, then there's a good chance you'll be able to deduct 20% of your business income. The deduction can phase out beginning at $315,000, if married, depending on your role and industry.

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Expensing pays
If you do own a business, making an investment that can improve your productivity or expand your business next year could pay off. The act allows you to deduct 100% of the cost of short-lived capital investments for five years. Therefore, it could make sense to invest in new equipment sooner rather than later.
Estate tax gets less onerous
Currently, estates smaller than $5.6 million are exempt from estate taxes, but the act changes that exemption to estates smaller than $11.2 million. This change means more estates, such as farms, will avoid the tax.
Something to keep in mind
The majority of the personal tax changes expire in 2025, so unless Congress extends them or makes them permanent before then, rates and deductions could change back to 2017's laws at that point. The corporate rates are permanent, but immediate expensing goes away in five years.