Much of the news surrounding Congress’ new tax bill has focused on politics — but what does it mean for you as an Illinois taxpayer?
In condensed form, here are some of the changes and how they’ll affect the consumer’s wallet. Congress is expected to vote on the measure in coming days.
New tax brackets
The bill would make changes to tax brackets and lower rates. For example, the top rate would drop to 37 percent, from 39.6 percent.
Most taxpayers would likely see a little more money in their February paychecks as a result of those changing brackets, though the bill would also eliminate personal exemptions, said Jeremy Scott, vice president of editorial at Tax Analysts, a nonprofit, nonpartisan publisher on tax policy and practice.
Standard deduction
The standard deduction would rise for individuals, from $6,350 to $13,000, and for couples, from $12,700 to $24,000.
That means many people may no longer want to itemize deductions if those itemized deductions aren’t as high as the new standard deductions, Scott said.
Child tax credit
Families making up to $400,000 would receive a $2,000 tax credit per child, up from $1,000. Families would receive the credit regardless of whether they itemize or take the standard deduction.
That credit would apply to any federal income taxes a family owes, or, if a family doesn’t owe any federal income taxes, it could receive refunds of up to $1,400 per child from the government, said Geoff Harlow, a tax partner at Kessler Orlean Silver and Co. in Deerfield.
Property tax deductions
The new bill would limit to $10,000 the amount of state and local taxes, including property taxes, that can be deducted annually. In 2016, the average annual property tax in Cook County was $5,660, and in Lake County it was $8,828, according to property data provider Attom Data Solutions.
In light of the change, many Cook County accountants encourage taxpayers who pay more than $10,000 a year in such taxes to temporarily avoid the cap by prepaying property taxes this year that wouldn’t be due until March.
Cook County Treasurer Maria Pappas recently made the prepayment process easier. Taxpayers can now download their property tax bills from the treasurer’s website, mail in checks, pay at any Chase bank or pay by credit card or direct debit. So far, about 6,000 Cook County homeowners have prepaid their property taxes for next year, compared with about 1,000 who usually do so, Pappas said.
“That’s a huge increase, and we’re going to have a whole lot more, we anticipate, through Dec. 31,” Pappas said.
Mortgage interest
People who bought their homes before Dec. 15 would still be able to deduct interest on mortgage debt of up to $1 million. Those who bought homes later, however, would see that amount lowered to $750,000.
Medical expenses
Currently, people can deduct medical expenses if those expenses exceed 10 percent of their adjusted gross income. The proposal lowers that threshold to 7.5 percent.
Alimony
For couples who divorce or separate after Dec. 31, 2018, anyone who pays alimony no longer will be able to deduct the payments.
Moving expenses
The costs of moving for a job (except in the military) would no longer be tax-deductible.
529 plans
People would be able to use money saved in 529 savings plans not just for college but also to pay for attendance at public, private or religious elementary and secondary schools.
Health insurance
The bill would erase the requirement that everyone buy health insurance or pay a penalty.
This story has been updated to clarify that taxpayers will be able to deduct interest on mortgage loans of up to $750,000.
Twitter @lschencker
