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2017 Tax Reform Bill

The Tax Cuts and Jobs Act contains a large number of provisions that would affect individual taxpayers.  However, to keep the cost of the bill within Senate budget rules, all of the changes will expire after 2025, and the tax law would revert to its current state.

Standard deduction will increase substantially in 2018; however, this will be offset to a great extent by the elimination of personal exemptions.  However the child tax credit will increase to $2,000 per qualifying child with a new refundable $500 credit for qualifying dependents who are not qualifying children.  Section 529 plans for post secondary education have been extended to grade school tuition as well as certain home school expenses.

With respect to itemized deductions, the mortgage interest deduction on first or second homes has been maintained; however, interest on home equity loans will no longer be deductible after 2017 and through 2025.  The limit on an individual’s contributions of cash to charitable organizations is increased from 50 to 60% of donor’s contributions base.

The Tax Cuts and Jobs Act also contains provisions that will help job creators of all sizes from lowering the corporate tax rate to allowing businesses to write off the full cost of new equipment.

Under the tab Quick Tips is a further discussion on recent as well as proposed legislation.

Tennessee Residents

While the state has not had an income tax on a person’s earned income, it has taxed certain interest and dividends received.  There are a number of exceptions, e.g., bank and credit union interest.  The Hall Tax on unearned income is being phased out and will be eliminated by 2022.  The schedule for the phase out is as follows for the tax rate.

  • 4% of taxable income for tax years beginning January 1, 2017
  • 3% of taxable income for tax years beginning January 1, 2018
  • 2% of taxable income for tax years beginning January 1, 2019
  • 1% of taxable income for tax years beginning January 1, 2020
  • Repeal beginning January 1, 2021

Any person 65 years of age or older having a total annual income (including social security) of less than $37,000 single and $68,000 joint filing are exempt from the Hall Tax.  The tax does not apply to the first $1,250 of income reported on each individual return or the first $2,500 on a joint return.  A legally blind person is exempt from the Hall Tax upon furnishing a written statement from their physician certifying their blindness.  When only one spouse on a joint filing is sighted, then only the income of that person is reportable on Schedule A.



Important information for those considering taking Social Security before normal retirement age

The following is the current normal retirement age (NRA) as specified by the Social Security Administration (SSA):

Year of birth
1938 65 and 2 months
1939 65 and 4 months
1940 65 and 6 months
1941 65 and 8 months
1942 65 and 10 months
1943 - 1954 66
1955 66 and 2 months
1956 66 and 4 months
1957 66 and 6 months
1958 66 and 8 months
1959 66 and 10 months
1960 and later 67

If you elect to take social security benefits before your NRA, then your benefits are reduced $1 for every $2 you earn in excess of the earning limit. For 2017, the earnings limit remains $16,920 and $17,040 in 2018.

In the year you reach NRA, the earning limit applies to the months prior to the month in which you reach NRA. Then your benefits are reduced $1 for every $3 you earn in excess of the earning limit. This limit is also more generous. For 2017, the annual earnings limit increases to $44,880 and $45,360 in 2018.

Once a person reaches NRA, there is no reduction in benefits for earnings.

The reduction identified above relates to a direct reduction in amounts of social security a person receives. Social security benefits may still be taxed up to 85% when income received by the taxpayer(s) exceeds $25,000 (single) and $32,000 (married filing jointly).

Should you take reduced benefits before your normal retirement age? That depends on several factors. To make an easy determination, please go to the following page.

The system will display what you would reap based on your current earnings, depending on when you choose to retire. Further, you can find out how your social security payments might change if your earnings increase or decrease in the future. While the SSA has long had an estimator on its website, it recently became automatically linked to data about each individual. Previously, you had to input earnings information on your own. It now takes the information that you receive on the paper statement each year and makes it interactive.



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