Free Guide to Tax Cuts and Jobs Act Information

Overview of the Tax Cuts and Jobs Act of 2017

The Tax Cuts and Jobs Act (TCJA) was signed into law on December 22, 2017, and represents one of the most significant changes to the U.S. tax system in decades. This federal legislation modified tax rates, deductions, and credits for individuals, businesses, and corporations. Understanding what this law changed helps you comprehend how your taxes may have been affected over the years it has been in effect.

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The law was designed with several stated goals: to simplify the tax code, to boost economic growth, and to provide tax relief to individuals and businesses. The legislation made changes that affected tax returns for the 2018 tax year and beyond. Some provisions were permanent, while others were set to expire after 2025, which is important context as you consider how tax laws may change in the future.

The TCJA reduced the federal corporate income tax rate from 35% to a flat 21%. For individuals, it created a new tax bracket structure with seven tax rates instead of the previous system. The law nearly doubled the standard deduction—the amount of income you can earn without owing taxes on it—for most filers. For example, in 2018, the standard deduction for single filers increased to $12,000, and for married couples filing jointly, it increased to $24,000.

Many people experienced changes in their tax bills because of these alterations. Some saw larger refunds or owed less in taxes, while others saw different results depending on their specific financial situation. The law also placed limits on certain deductions that previously had no caps, such as the State and Local Tax (SALT) deduction, which became limited to $10,000 per year.

Practical Takeaway: The TCJA fundamentally restructured how federal income taxes are calculated for most Americans. Learning about its key provisions helps you understand why your tax situation may have changed after 2017 and gives you context for tax planning.

Changes to Individual Income Tax Rates and Brackets

One of the most direct ways the Tax Cuts and Jobs Act affected taxpayers was through changes to income tax brackets and rates. Before the law, there were ten federal tax brackets ranging from 10% to 39.6%. The TCJA reduced this to seven brackets with rates of 10%, 12%, 22%, 24%, 32%, 35%, and 37%. This restructuring meant that income thresholds for each bracket shifted, and the top marginal tax rate dropped from 39.6% to 37%.

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The impact of these changes varied significantly based on income level. A single person earning $50,000 in 2018 faced different tax calculations than they would have in 2017. Similarly, married couples saw their bracket thresholds adjusted. For instance, in 2018, married filing jointly taxpayers paid 22% on income between $19,751 and $80,250, whereas the same income level in 2017 would have been subject to different rates across multiple brackets.

These tax bracket changes weren't static—they adjusted annually for inflation. The IRS updates tax brackets each year to account for inflation, meaning the dollar amounts where each rate applies shift upward. For example, the 22% bracket for single filers started at $9,526 in 2018 but grew to $39,476 by 2023. This means that even if your income stayed the same, your tax bracket percentage might have changed from year to year.

The tax bracket changes were set to sunset after December 31, 2025, under the law's original language. This means that unless Congress takes action to extend these provisions, the tax brackets will revert to a structure more similar to pre-2017 law. Understanding when these changes are set to expire helps you plan for potential future tax increases.

The relationship between tax brackets and your actual tax bill is important to understand. Moving into a higher bracket doesn't mean all your income is taxed at that higher rate—only the income within that bracket is. For example, if you're a single filer earning $60,000, you don't pay 22% on all $60,000. Instead, you pay 10% on income up to $11,000, then 12% on income from $11,001 to $44,725, then 22% on income from $44,726 to $60,000.

Practical Takeaway: Knowing your tax bracket helps you estimate your annual tax liability and understand how additional income might affect your taxes. Use the annual IRS tax tables to locate your specific bracket based on your filing status and income level.

Standard Deduction Increases and Their Impact

The standard deduction is the amount of income that you can earn without owing federal income tax on it. The Tax Cuts and Jobs Act nearly doubled the standard deduction for most filers, a change that significantly affected whether people owed taxes at all. In 2017, the standard deduction for a single filer was $6,350 and for married filing jointly was $12,700. Beginning in 2018, these amounts jumped to $12,000 and $24,000 respectively.

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This increase in the standard deduction meant that millions of Americans would no longer owe federal income tax because their income fell below the new threshold. For example, a single person earning $20,000 per year in 2017 would have had taxable income of $13,650 after taking the standard deduction. Starting in 2018, that same person with the same income would have had zero taxable income, owing no federal tax at all. This change particularly benefited lower and moderate-income workers.

The standard deduction amounts continue to adjust each year based on inflation. By 2024, the standard deduction for single filers had increased to $14,600, while married filing jointly had increased to $29,200. These annual adjustments mean that the income threshold for owing taxes gradually rises, helping maintain the intended effect of the law over time.

However, the increase in the standard deduction also meant that fewer people benefit from itemizing deductions. When you itemize deductions, you list out specific expenses like mortgage interest, charitable contributions, and state and local taxes instead of taking the standard deduction. If your itemized deductions don't exceed the standard deduction, you're better off taking the standard deduction. Before the TCJA, more people had itemized deductions that exceeded their standard deduction. After the change, fewer people found itemizing beneficial because the standard deduction was so much larger.

The increased standard deduction affected different groups differently. Elderly and blind taxpayers receive an additional standard deduction, which also increased. For example, in 2024, a single filer who is 65 or older receives an additional $1,850 added to their standard deduction, bringing their total standard deduction to $16,450. This extra amount helps ensure that older Americans with modest incomes don't face tax burdens.

Practical Takeaway: If your income is below the current standard deduction for your filing status, you likely don't owe federal income tax even if you had taxes withheld from paychecks. Check the IRS website each year for the current standard deduction amounts for your situation.

Limitations on Deductions and Credits

While the Tax Cuts and Jobs Act increased the standard deduction, it also placed new limits on certain deductions that had previously been unlimited or less restricted. One of the most notable changes was the cap on State and Local Tax (SALT) deductions. Before the law, taxpayers could deduct all of their state income taxes, property taxes, and sales taxes with no limit. Starting in 2018, this deduction was capped at $10,000 per year total, regardless of how much you actually paid in state and local taxes.

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This SALT deduction cap affected people differently based on where they lived and their income level. A homeowner in New Jersey or California with significant property taxes and state income taxes might exceed the $10,000 cap, meaning they couldn't deduct the excess. Meanwhile, someone in a state with lower property taxes might not be affected by the cap at all. For example, a married couple filing jointly with $200,000 in income in New Jersey who paid $15,000 in property taxes and $8,000 in state income tax could only deduct $10,000 of the $23,000 they actually paid.

The law also eliminated or severely limited numerous other deductions. The deduction for moving expenses (with limited exceptions