When Do the 2018 Tax Reform Changes Take Effect?

Tax reform imposes the biggest change to the tax code since the 1980s. And many people are wondering what’s changed, how it will affect them, and what they should do about it.

For most individuals, very little impacts their 2017 return. Except for the limitations on medical deductions (more on that later), the tax return you file now should be unaffected.

Most of the tax reform changes took effect January 1, 2018. That means they will affect the tax return you file in 2019.

Here is a quick break down of the tax law changes that will most likely affect you and when they go into effect.

Medical expense “floor” reverts back to 7.5 percent

Before the Affordable Care Act (ACA), you could deduct medical expenses with your itemized deductions to the extent that your expenses exceeded 7.5 percent of your adjusted gross income (AGI). That limitation is called a “floor.” Under the ACA, the floor for most people was raised to 10 percent, making it less likely for them to qualify for a medical deduction.

Under the new tax reform, the floor drops back down to 7.5 percent for everyone. That is a retroactive change to January 1, 2017 as well.

Healthcare mandate repealed – but not in effect yet

If you and your family do not have adequate health insurance in 2018, and you don’t qualify for any exceptions, you may still face the “healthcare mandate” penalty.

Starting with the 2019 tax year, however, the healthcare mandate is repealed. You won’t file a tax return with the repealed mandate until 2020.

Tax brackets

Despite talk of fewer tax brackets, the final bill still has seven. Your tax bracket is the rate you pay on each dollar of taxable income over a certain amount. All but the lowest brackets are slightly lower than the 2017 tax brackets. For example, a single person with $50,000 in taxable income in 2017 was in the 25 percent tax bracket. In 2018, that person falls into the 22 percent tax bracket.

In addition to the rates being lower, the income levels for each bracket increased. These rate changes went into effect Jan. 1, 2018.

Standard deductions and personal exemptions

The standard deduction significantly expanded under the new tax law, which is effective for the 2018 tax year. In fact, the standard deduction is now so large that many people no longer need to itemize deductions.

The new standard deduction for single filers and those married filing separately is $12,000. Married couples get a $24,000 standard deduction. Taxpayers filing as Head of Household can deduct $18,000. (Keep in mind all of these numbers will be indexed for inflation going forward from year to year.)

Personal exemptions are gone as of January 1, 2018. If you or your spouse are age 65 or blind, however, you can increase your standard deduction by $1,300.

Child Tax Credit

For the and beyond, the Child Tax Credit doubles under the new law. It increased from $1,000 per child to $2,000.

More people will benefit from the credit, as well. That’s because up to $1,400 of the credit is now refundable for each qualifying child. Previously, lower-income parents who didn’t owe enough in tax to take the full amount forfeited any remaining portion of the credit that exceeded the amount of tax they owed. Now they will receive up to $1,400 even if that dollar amount is more than the tax they owed or had withheld.

The good news for higher income parents is that they can earn up to $400,000 in 2018 before the child tax credit starts to phase out.


Under the new law, an ex-spouse that pays alimony can no longer deduct that amount on their tax return.  It’s also not considered taxable income for the person who receives it.

However, this change does not affect most finalized divorces. It only applies to divorces that occur after Dec. 31, 2018. It also affects any divorces that are modified after that date, so long as the modification documents specifically say the new reform changes apply to it.

When does my paycheck show a difference?

If you are an employee, you should see changes in your income tax withholding, and thus your take-home pay, due to the tax reform changes. You may start to see changes in the middle of Feb. 2018 depending on the number of withholdings you claim on Form W-4. If you see a change in your paycheck, take the time to review your tax withholding. Use TaxAct’s 2018 tax calculator and W-4 Withholding calculator available in the products to determine if you’re withholding the right amount for your tax situation.

What’s next?

No matter what the changes include, if you prepare your return with TaxAct, you can rest assured the program is up-to-date. Each solution will help you navigate the tax reform changes based on your tax situation for this year and beyond.

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