What is Tax Cuts and Jobs Act (TCJA)?
Tax Cuts and Jobs Act tax law made substantial changes to the tax rates and the tax base for the individual income tax. President Donald Trump signed the Tax Cuts and Jobs Act (TCJA) on Dec. 22, 2017. It cut individual income tax rates, doubled the standard deduction, and eliminated personal exemptions from the tax code.
TCJA tax law is set to expire in 2025 for individuals and revert back to pre-TCJA era rate. Below table comparing tax rates for pre TCJA & TCJA rates.
| 2017 Income Tax Rate (Pre-TCJA) | 2022 Income Tax Rate | 2022 Income for Those Filing As Single | 2022 Income for Those Filing Jointly |
| 10% | 10% | $0-$10,275 | $0-$20,550 |
| 15% | 12% | $10,276-$41,775 | $20,551-$83,550 |
| 25% | 22% | $41,776-$89,075 | $83,551-$178,150 |
| 28% | 24% | $89,076-$170,050 | $178,151-$340,100 |
| 33% | 32% | $170,051-$215,950 | $340,101-$431,900 |
| 33%/35% | 35% | $215,951-$539,990 | $431,901-$647,850 |
| 39.6% | 37% | More than $539,990 | More than $647,850 |
The Tax Cuts and Jobs Act will have an effect on tax payments for all Americans from the 2018 tax year and primarily lasting through 2025. Overall, the TCJA lowers tax rates across income levels helping reduce Americans’ income tax burden. Individually, understanding how the Act affects taxes in your tax bracket and individual circumstances that affect you directly can help you to ensure you are taking advantage of all the deductions you deserve and ultimately paying the lowest tax bill available to you.
Planning to Retire soon?
Planning to retire in next 3 to 10 years, TCJA which is scheduled to expire in 2025 will have significant impact on your retirement accounts like 401k and IRA’s that you saved to fund your retirement. Our tax-efficient distribution strategy could save you money and make your assets last longer. Reach out to us to start planning a tax-efficient distribution strategy for you.
