At The Wall Street Journal, Anne Tergesen explains six changes to the tax code in the 2017 tax reform law that could especially affect retirees. She writes (much abridged):
1. Higher standard deduction:
Many retirees, especially those who have paid off mortgages, take the standard deduction. For them, one positive change is the near-doubling of this deduction, or the amount taxpayers can subtract from their adjusted gross income if they don’t itemize deductible expenses including state taxes and charitable donations.
2. A tax break for charitable contributions:
Retirees who take the standard deduction can still claim a tax benefit for donating to charity.
3. More options for 529 donors:
The new law allows taxpayers to withdraw up to $10,000 a year from a tax-advantaged 529 college savings account to pay a child’s private-school tuition bills from kindergarten to 12th grade.
4. Higher gift-tax exemption:
The tax overhaul includes a sweet deal for ultrawealthy families.
For the next seven years, the gift-tax exemption for individuals is an inflation-adjusted $11.4 million, up from $11.18 million in 2018 and $5.49 million in 2017. For couples, it is $22.8 million, up from $22.36 million in 2018 and $10.98 million in 2017.
5. Less generous medical-expense deduction:
For 2018, taxpayers can deduct eligible medical expenses that exceed 7.5% of adjusted gross income. That means for someone with a $100,000 income and $50,000 of medical or nursing-home bills, $7,500 is not deductible.
6. Goodbye to Roth re-characterizations:
The legislation ended the ability of savers to “undo” Roth IRA conversions, which had been used to nullify certain IRA-related tax bills.
Read more here.