Tax Reform Notes

Comments Off by in CMW News
December 29, 2017
Tax Reform Notes

Image Copyright Ted Grussing Photography – Used with permission

It may be old news now, but the Tax Reform Bill is officially Law! President Trump signed the bill, passed by the House and Senate, shortly before Christmas day. And the burning question on everyone’s mind is ‘How will this affect me?”

It is our understanding that the new law will look like this, however, we are not accountants and have not seen the official law.

  • Individual Tax Rates: Most individuals will not see the effects on their paychecks until February 2018, but many of those changes are temporary and will sunset in 2025. The law has made temporary changes to individuals’ tax rates and bracket amounts.
Current Marginal Tax Rate Proposed Marginal Tax Rate Income Level (Single Filers) Income Level (Couples Filing Jointly)
10% 10% $0 — $9,525 $0 — $19,050
15% 12% $9,525 — $38,700 $19,050 — $77,400
25% 22% $38,700 — $82,500 $77,400 — $165,000
28% 24% $82,500 — $157,500 $165,000 — $315,000
33% 32% $157,500 — $200,000 $315,000 — $400,000
35% 35% $200,000 — $500,000 $400,000 — $600,000
39.60% 37% $500,000 and up $600,000 and up

  • Standard Deductions: Doubled to $12,000 for single filers and $24,000 for joint filers. Standard deductions for the elderly and the blind will stay the same.
  • Changes to investment advice fee itemized deduction: Investors will no longer be able to take an itemized deduction for investment advice expenses making the effective tax rates on investment returns higher. As an example: if a client has an 8% return on an investment and pays a 2% management fee, the client would earn a net 6% but still pay tax on the full 8% gain. This results in higher taxes for the client and effectively makes independent advice more expensive. (waters)
  • Estate Planning: The bill takes the estate tax exemption from 5 to $10 million, but it’s also indexed for inflation after 2011. The bill also calls for doubling the value threshold on the 40% levy on estates worth nearly $11 million for individuals and $22 million for couples. The estate tax exemption also has a sunset provision to original exemption amounts in 2026.
  • Charitable Deductions: “Taxpayers will have to itemize donations to get the benefit.”(waters). With the standard deduction increasing to $24,000, this raises the household deductibility making the standard deduction more attractive.
  • Roth Characterizations: Under old law, you could convert a traditional Individual Retirement Account (IRA) to a Roth IRA and later change it back to a traditional if you wished. However, now you can no longer recharacterize to a traditional IRA.
  • No changes to Coverdell Savings Accounts.

Have a Happy New Year!


Waters, J. (2017, December 18). Tax Reform Bill Details: Here’s How it Might Impact Investor Taxes. Retrieved from