Key Changes Under TCJA

The Tax Cuts and Jobs Act (TCJA) was signed into law by President Trump on Dec. 22, 2017. The bill is the most significant change to the tax code since the Reagan era.

What are the key changes included in this law?

The TCJA permanently lowered the corporate tax rate and made significant changes for individuals and businesses formed as pass-through entities (e.g. partnerships and S corporations). However, many of these changes are scheduled to sunset on Dec. 31, 2025. Absent further legislation, this would mean that several provisions, including individual tax rates and the estate tax exemption, would revert to current law in 2026. Here are the key components and how they have or have not changed:

Tax Item

Changes in the TCJA

Top Corporate Tax Rate

Permanently reduced from 35% to 21%

Partnership & Pass-Through Entities

Allowed a 20% deduction, subject to limitations

Individual Ordinary Income Tax Rates

Temporarily reduced through 2025

Long-Term Capital Gains & Qualified Dividends

No change

Taxable Interest Income & Short-Term Capital Gains


No change

Corporate Alternative Minimum Tax

Permanently eliminated

Individual Alternative Minimum Tax

Exemption increased through 2025


Standard Deduction

Increased through 2025

Single: $12,000 (2018)

Joint: $24,000 (2018)

Head of Household: $18,000 (2018)



Itemized Deductions

Eliminates all deductions except mortgage interest, state and local taxes, medical expenses, investment interest expense and charitable contributions; mortgage interest and state and local tax deductions reduced

Personal Exemptions

Eliminated through 2025 for taxpayers, their spouses and dependents

Estate, Gift & Generation-Skipping Taxes

Increased to $11.18 million for 2018, scheduled to increase with inflation through 2025


How are deductions changing?

Deductions reduced or modified:

+ State and local income tax deductions for individuals will be limited to $10,000

+ Mortgage interest will be deductible on acquisition indebtedness up to $750,000 (applies to debt incurred after 12/15/17. Older home mortgage loans are grandfathered in and get the $1 million cap

+ Interest paid on home equity debt (i.e., HELOC) may only be deducted if the money is spent on acquiring, updating or constructing a primary or secondary residence


No longer deductible:

Job-related expenses (such as tax preparation and investment management fees)

+ Alimony payments (and alimony income will no longer need to be reported as part of the recipient’s gross income)

Business entertainment expenses (50% of meals may still be deducted)

Losses from theft

Casualty losses (unless they are from an area declared a disaster by the president of the United States)


Some deductions that have increased:

Cash contributions to a public charity will be deductible up to 60% of your adjusted gross income (AGI)

+ Through 2019, medical expenses will be deductible if they exceed 7.5% of your AGI


New deduction for pass-through entities:

As a general rule, taxpayers will receive a deduction equal to 20% of qualified business income earned from a pass-through company

Married taxpayers who file jointly and earn more than $315,000 a year will receive a limited deduction

Single taxpayers who earn more than $157,500 a year will receive a limited deduction


Alternative Minimum Tax has changed:

The Alternative Minimum Tax (AMT) for corporations has been eliminated. It remains for individual taxpayers. However, the exemption and threshold amounts for individuals have been increased.


The Child Tax Credit increases in value from $1,000 to $2,000. The tax reform bill also introduces a new $500 credit for non-child dependents

Beginning in 2019, individuals who choose to go without healthcare coverage for the year will not have to pay tax penalties.


TCJA Changes to Meals, Entertainment, and Fringe Benefits

The Tax Cut and Jobs Act of 2017 (TCJA) made changes to meals, entertainment expenses, and fringe benefits.

Under previous tax law, entertainment expenses were 50% deductible, while meals were from zero to 100% deductible. The TCJA changed entertainment expenses to non-deductible and limits most meals to 50% deductibility, but allows for 100% deduction on certain celebratory events.

Other fringe benefits are no longer deductible to businesses or force employers to include benefits in the employee’s W-2 to be deductible. Employers must include transportation benefits in the employee’s W-2 wages to be deductible to the employer.

The TCJA disallowed employees from deducting moving expenses. Employers can deduct reimbursement of moving expenses to employees if the amounts are included in the employee’s W-2 wages.

Certain expenses, such as coffee, were 100% deductible by the employer and non-taxable to the employee. The TCJA provides for exemption from employees’ income, but allows for only a 50% deduction by the employer.

As with most of the TCJA, there are more questions than answers, even a year after the law passed.