Changes in Tax Laws Affecting Individual Taxpayers

In recent years, several significant changes have been made to tax laws that directly impact individual taxpayers. These changes have implications for various aspects of personal finances, including income tax rates, deductions, credits, and retirement savings. Understanding these changes is crucial for individuals to effectively plan their taxes and maximize their financial well$-$being.

Tax Cuts and Jobs Act $($TCJA$)$: One of the most substantial changes in tax law affecting individual taxpayers in recent years is the Tax Cuts and Jobs Act, which was signed into law in December $2017.$ The TCJA introduced several key provisions that impact individual taxpayers, including:

Lower Tax Rates: The TCJA lowered tax rates for most individual taxpayers. The act reduced the number of tax brackets and adjusted tax rates across income levels, resulting in lower tax liabilities for many individuals.

Increased Standard Deduction: The standard deduction was nearly doubled under the TCJA, making it more attractive for taxpayers to take the standard deduction rather than itemizing deductions. This simplifies tax filing for many individuals.

Changes to Itemized Deductions: The TCJA made significant changes to itemized deductions. It limited or eliminated certain deductions, such as the state and local tax deduction $($SALT$)$ and the miscellaneous itemized deduction subject to the $2\%$ floor. Additionally, the deduction for mortgage interest was modified.

Expansion of Child Tax Credit: The TCJA expanded the Child Tax Credit, making it available to more taxpayers and increasing the credit amount. This provides additional tax relief for families with children.

Limitations on Certain Deductions: The TCJA imposed limitations on deductions for state and local taxes, mortgage interest on home equity debt, and miscellaneous itemized deductions subject to the $2\%$ floor. These changes may affect taxpayers differently depending on their individual circumstances.

Secure Act: Another significant change affecting individual taxpayers is the Setting Every Community Up for Retirement Enhancement $($SECURE$)$ Act, which was enacted in December $2019.$ The SECURE Act made several changes to retirement savings rules, including:

Changes to Required Minimum Distribution $($RMD$)$ Age: The SECURE Act increased the age for starting required minimum distributions from retirement accounts from $70\frac{1}{2}$ to $72$ years old. This allows individuals to delay taking distributions from their retirement accounts, potentially allowing for more tax$-$deferred growth.

Elimination of Age Limit for Traditional IRA Contributions: The SECURE Act removed the age limit for making contributions to traditional IRAs, allowing individuals of any age to contribute as long as they have earned income.

Changes to Stretch IRA Rules: The SECURE Act modified the rules for beneficiaries of inherited retirement accounts, requiring most beneficiaries to withdraw the entire account balance within $10$ years of the original owner's death. This may affect estate planning strategies for individuals with significant retirement savings.

Expansion of $529$ Plan Usage: The SECURE Act expanded the permissible uses of $529$ education savings plans to include expenses related to apprenticeship programs and qualified student loan repayments.

Fill in the Blank Question:

In $2017,$ the Tax Cuts and Jobs Act $($TCJA$)$ increased the $\_$ deduction, making it more attractive for taxpayers to take the standard deduction rather than itemizing deductions.

A$)$ Sales tax

B$)$ Standard

C$)$ Itemized

D$)$ Mortgage interest