With all the talk of who is benefiting from the recent 520 page tax bill that was finally signed by President Trump right before Christmas, it becomes quite confusing to answer who is middle class, who is rich, and what does it mean to YOU. The truth is that certain situations may prove favorable and others may prove more costly.

Current estimate is that $1.4 trillion less will be collected in taxes at current earning levels. If income rises or a flood of foreign harbored money returns to the US (which is what the authors are hoping), this will be less.

The attempt again is made to simplify the tax code with a few more layers of complication.

The following are the situations that have changed:

Deductions and Exemptions (Mixed Gains and Losses)

The standard deduction has basically doubled, and the dependent exemptions have disappeared. The effect is that fewer taxpayers will need to itemize their deductions, but if you had more than 4 dependent exemptions for married couples or 2 dependent exemptions if single, you will lose deductibility you once had. If you had over $24,000/12,000 (Married/Single) in itemized deductions already, then you basically lose any dependent exemption reduction.

Child Tax Credit (Gain)

The Credit for children under 17 has been raised from $1,000 to $2,000 to pay tax liability but only $1,400 is refundable whereas all $1,000 was refundable before.

Deduction Changes (Mixed Gains and Losses)

The medical expense deduction floor is set back to 7.5% of Adjusted Income as it has been prior to Obamacare at 10%. Local taxes (state withhold, property tax/sales tax) is capped at $10,000. Mortgage interest on balances over $750,000 are not deductible (was $1,000,000).

Obamacare penalty

The penalty for not having medical coverage will go away starting in 2019.

Tax Brackets (Gain)

There are fewer individual brackets with the top bracket moving from 39.6% to 37%. Overall, the income brackets have been raised - meaning you have to make more to be taxed at the next bracket.

Businesses (Gain)

Pass thru entities (LLC's, Partnerships, S-Corps) will get a 20% of income exemption. C-Corporation brackets have been lowered to a maximum tax of 21% from 35%. There are lots of advantages to tax planning if you own a business.