In a Nutshell
Tax reform will have a big effect on your 2018 taxes, but nearly zero impact on 2017 tax returns. Here are five ways tax reform won’t affect doing your taxes this season — and one way in which it might.This article was fact-checked by our editors and reviewed by Christina Taylor, MBA, senior manager of tax operations for Credit Karma.
The long-term impact of tax reform remains to be seen, but if you’re doing your 2017 taxes, you’re probably more concerned with how it could affect you now.
The tax reform law adopted in December 2017 brings big changes for 2018 and beyond, but won’t affect 2017 taxes much, if at all. Here are five ways tax reform won’t change Americans’ 2017 taxes, and the one way in which it could.
1. Standard deductions stay the same
For your 2017 federal income taxes, the standard deduction continues to be what the IRS originally set.
- $6,350 for single filers or those who are married filing separately
- $12,700 for anyone married filing jointly or as a qualifying widow(er)
- $9,350 for heads of household
From 2016 to 2017, the standard deduction rose $50 for single filers and heads of household, and $100 for those married filing jointly. Under tax reform, standard deductions are set to increase significantly starting with 2018 taxes.
- $12,000 for single filers, a qualifying widow(er) and married filing separately
- $18,000 for head of household
- $24,000 for married filing jointly
2. You can still take personal exemptions
Provided you meet income and other requirements, personal exemptions are allowed for 2017 tax returns. Each exemption is worth $4,050 and you can generally take one for yourself, one for your spouse, and one for each qualifying dependent you claim. These exemptions can be very helpful for lower-income filers or those with many dependents.
Tax reform suspends personal exemptions starting in 2018 and ending Dec. 31, 2025.
3. You can still deduct the interest on your home equity loan
Being able to deduct mortgage interest from your federal income taxes is a perk of homeownership. If you own a home, you may also have a home equity loan. For your 2017 taxes, you may be able to deduct the interest on your home equity loan of $100,000 or less ($50,000 for people married filing separately).
For some taxpayers, the home equity interest deduction could go away under tax reform for the 2018 to 2025 tax years. However, the IRS has said if a home equity loan is used to buy, build or substantially improve the home that secures the loan, the interest may still be deductible, provided it meets other qualifying criteria. Click here to read the IRS guidance on deducting home equity loan interest after 2017.
4. You can still deduct qualifying state and local taxes
Provided you meet all the qualifications, in 2017 you might be able to deduct state and local taxes on income, real estate property and personal property. Or you can choose to deduct state and local sales tax. For tax years 2018 to 2025, tax reform caps the amount you can deduct for these taxes at $10,000 ($5,000 for anyone married filing separately).
5. Tax rates stay the same
Revised tax rates are probably one of the most-talked-about provisions of tax reform, but they don’t take effect until your 2018 taxes.
| 2017 marginal tax rates | 2018 marginal tax rates |
| 10% | 10% |
| 15% | 12% |
| 25% | 22% |
| 28% | 24% |
| 33% | 32% |
| 35% | 35% |
| 39.6% | 37% |
For 2017, tax rates stay the same. Your income determines the marginal tax rate that applies to you. Tax reform changes the rates, and it adjusts the thresholds for each tax bracket. The new rates apply to federal income taxes for the 2018 to 2025 tax years.
And one way tax reform could affect 2017 taxes …
A retroactive item in the tax reform bill that could potentially affect your 2017 tax return is the change in the medical expense deduction. Previously, you could only deduct unreimbursed qualifying medical expenses if they exceeded 10% of your adjusted gross income. Tax reform lowered that threshold to 7.5% and makes the change retroactive to Dec. 31, 2016.
Bottom line
The effect of tax reform on 2017 taxes will be zero for most filers. However, if you have big medical bills, be sure to consider taking advantage of the lower threshold for claiming a medical expense deduction. For more info, check out this article on how tax reform could change your 2018 taxes.
Christina Taylor is senior manager of tax operations for Credit Karma. She has more than a dozen years of experience in tax, accounting and business operations. Christina founded her own accounting consultancy and managed it for more than six years. She co-developed an online DIY tax-preparation product, serving as chief operating officer for seven years. She is the current treasurer of the National Association of Computerized Tax Processors and holds a bachelor’s in business administration/accounting from Baker College and an MBA from Meredith College. You can find her on LinkedIn.