Question By: Tax Cuts and Jobs Act (TCJA): The TCJA, passed in 2017, made significant changes to the tax code, including lower tax rates for individuals and businesses, an increased standard deduction, and modifications to deductions and credits.
Standard deduction: The standard deduction is a fixed amount that reduces taxable income. The TCJA nearly doubled the standard deduction, simplifying tax filings for many individuals and families.
Itemized deductions: Certain expenses, such as mortgage interest, state and local taxes, and medical expenses, can be itemized and deducted from taxable income. However, the TCJA modified and limited some itemized deductions.
Child tax credit: The child tax credit provides a tax break for eligible families with dependent children. Recent changes have increased the credit amount and expanded eligibility.
Qualified Business Income (QBI) deduction: This deduction allows certain self-employed individuals and small business owners to deduct a portion of their qualified business income.
Changes due to COVID-19: The pandemic prompted legislative actions that impacted taxes, including economic impact payments (stimulus checks), expanded unemployment benefits, and provisions for pandemic-related tax relief.
State and local tax (SALT) deduction: The deduction for state and local taxes was limited under the TCJA, but some recent proposals aim to expand or eliminate this limitation.
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