Top 5 Facts About Quitclaim Deeds

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Real property was once transferred through a ceremonial act known as “livery of seisin” in which the person transferring the land passed a twig or clod of turf from the land to the person taking delivery of the land.

A verbal and/or written contract may have accompanied the gesture but only the “livery of seisin” legally transferred title to the property. Of course today, title to real property is conveyed by a deed. A property deed is a written and signed legal instrument that is used to transfer ownership of real property from a previous owner (the grantor) to a new owner (the grantee).

Deeds can be classified in numerous ways. Broadly, deeds are classified as official or private. Official deeds are executed pursuant to court or legal proceedings, such as trustees‘ deeds and tax deeds. Most property transactions, however, involve private deeds.

Deeds are also categorized based on the type of title warranty provided by the grantor. General warranty deeds provide the highest level of buyer protection, while quitclaim deeds typically provide the least.

Quitclaim deeds are most often used when transferring property between family members or to cure a defect on the title, such as a name that has been misspelled. Although they are fairly common and most real estate agents have experience dealing with them, they are generally used in transactions where the parties know each other – and are therefore more likely to accept the risks associated with the lack of buyer protection. They may also be used when a property transfers ownership without being sold, that is when no money is involved.

Because quitclaim deeds offer such limited buyer protection, it’s important to understand exactly what you’re getting when you buy property this way. Here, five things to know about these contracts:

1. You’re buying the least amount of protection of any deed.

Also called a non-warranty deed, a quitclaim deed conveys whatever interest the grantor currently has in the property, if any. The grantor only “remises, releases and quitclaims” his or her interest in the property to the grantee. No warranties or promises regarding the quality of title are made. The deed will clarify this by including language such as, “The Grantor makes no warranty, express or implied, as to title in the property herein described.”

In situations where the grantor under a quitclaim deed has no interest in the property, the grantee acquires nothing by virtue of the quitclaim deed and acquires no right of warranty against the grantor.

2. Only accept a quitclaim deed from grantors you know and trust.

Because quitclaim deeds make no warranty about the quality of the grantor’s title, they are generally used for low-risk transactions between people who know each other, and typically involve no exchange of money. Quitclaim deeds, therefore, are commonly used to transfer property within a family, such as from a parent to an adult child, between siblings or when a property owner gets married and wants to add his or her spouse to the title. Quitclaim deeds are also used when a married couple owns a home together and later divorceskj. When one party acquires the home in a divorce settlement, the other may execute a quitclaim deed to eliminate his or her interest in the property (and to comply with the court’s decision).

3. They can be used to clear a title defect.

A quitclaim deed is often used to cure a defect (a “cloud on the title”) in the recorded history of a real estate title. Title defects include items such as issues with wording (for example, on a document that does not comply with state standards), a missing signature (such as that of a spouse) or failure to properly record real estate documents. For example, if the name of a grantee is misspelled on a warranty deedplaced in the public record, a quitclaim deed with the correct spelling can be executed to the grantee to perfect the title.

As another example, assume a title search reveals that the spouse of a past grantor may have interest in the property because he or she did not properly execute a past deed in the chain of title. In this situation, the spouse of the past grantor can be asked to execute a quitclaim deed to the present owner “quitclaiming” any interest he or she may have in the property.

4. They’re as effective as a warranty deed to transfer title – but only if the title is good.

A quitclaim deed can convey title as effectively as a warranty deed if the grantor has good title when the deed is delivered. It is the lack of any warranties, however, that make a quitclaim deed less attractive from a grantee’s perspective. If the title contains a defect, for example, the grantee has no legal recourse against the grantor under the deed. A quitclaim deed is often used if the grantor is not sure of the status of the title (whether it contains any defects) or if the grantor wants no liability under the title covenants.

5. A quitclaim deed affects ownership and the name on the deed, not the mortgage.

Because quitclaim deeds expose the grantee to certain risks, they are most often used between family members and where there is no exchange of money. Due to this, quitclaim deeds typically are not used in situations where the property involved has an outstanding mortgage. After all, it would be difficult for many grantors to pay off a mortgage without proceeds from the sale of the property.

In some instances, however, quitclaim deeds are used when the grantor has a mortgage. In this case, the grantor remains liable for the mortgage even after ownership has transferred through the execution of a quitclaim deed. This is because quitclaim deeds transfer title but have no effect on mortgages. This situation can be made worse if the mortgage contains a due-on-sale clause, a common provision stipulating that the entire loan becomes due as soon as the title is transferred (not just if the property is “sold” with an exchange of money, as the name “due-on-sale” would seem to imply).

If the grantor has quitclaimed the property with the belief that the grantee will make the mortgage payments, the grantor has no recourse if the grantee stops making payments or sells the property to another party. To mitigate potential financial and legal troubles, the grantee can assume the mortgage with the lender (with the lender’s approval) or refinance the property and pay off the original loan. To add protection to the grantor, a legally enforceable agreement can be drawn to document the terms of payment.

The Bottom Line

The transfer of an owner’s title is made by deed. Certain essential elements must be contained in the deed for it to be legally operative. Different deeds provide various levels of protection to the grantee, and the obligations of a grantor are determined by the form of the deed. A quitclaim deed offers the least level of buyer protection and is generally used when the title is transferred between family members or to clear a defect on the title. If the property comes with what is known as a “special-purpose deed”  – which could be a correction deed, a deed of gift or a deed of release – these usually offer no more protection than a quitclaim deed. Research them carefully, as well. And be sure to consult a qualified real estate attorney: Deeds are important legal documents that affect ownership interests and rights.

By Jean Folger November 17, 2017 — 6:11 AM EST

How the GOP Tax Bill Affects You

Read the Investopedia Article Here

On Friday, December 22, 2017, President Donald Trump signed the massive tax bill. Formerly known as the Tax Cuts and Jobs Act – so-named because it cuts individual, corporate and estate tax rates, and the lower corporate tax rates are said to be a precursor to job creation – the bill went into history as “An Act to Provide for Reconciliation Pursuant to Titles II and V of the Concurrent Resolution on the Budget for Fiscal Year 2018,” courtesy of a technicality enforced by the Senate parliamentarian.

The final bill is more than 500 pages – and the title gives you just a whiff of how the text reads. Even tax and public policy experts probably need megadoses of caffeine to slog through it. The ultimate effect on Americans and the economy remain to be seen. But some effects are clear already.

What follows is our take on what you can expect to affect you in the near term – starting in the 2018 tax year – plus a quick look at some much-discussed provisions that didn’t happen. While this guide doesn’t include an exhaustive list of every change to the tax code, it does provide the key elements that will affect the most people.

The changes involve so many parts of the tax code that how the tax bill affects you depends on your personal situation — how many children you have, how much you pay in mortgage interest and state/local taxes, how much you earn from work, and more. So find yourself in the sections below and start planning.

You Own a Home

If you live in a high-tax area, you will be especially affected by the new $10,000 limit on how much state and local tax (including property taxes) you can deduct from your federal income taxes (exempted: taxes that are paid or accrued through doing a business or trade). More details below, under “You Itemize and File Schedule A.”

Your current mortgage-interest deductions won’t be affected, but if you move, that will change (see next section). Fewer people will itemize, though, since the standard deduction will increase from $6,350 to $12,000 for individuals and for married couples filing separately, from $9,350 to $18,000 for heads of household, and from $12,700 to $24,000 for married couples filing jointly. Homeowners also won’t be able to deduct the interest on home-equity loans, whether they itemize or not.

You’re Buying (or Selling) One

Under current law, homeowners can deduct the interest on a mortgage of up to $1,000,000, or $500,000 for married taxpayers filing separately. Now, anyone who takes out a mortgage between December 15, 2017, and December 31, 2025, can only deduct interest on a mortgage of up to $750,000, or $375,000 for married taxpayers filing separately.

For buyers in expensive markets, these tax code changes could make home ownership less affordable. For most people, the difference between owning and renting, from a tax standpoint, is now much smaller. Zillow estimates that only about 14% of homeowners, down from 44%, will claim the mortgage interest deduction next year.

The National Association of Realtors, one of the nation’s largest lobbying groups, said the lower mortgage interest deduction could cause home prices to fall. Possibly counteracting that fall would be tighter inventory from potential sellers who decide to keep their homes because they benefit from the current mortgage rules and would lose out under the new ones. Moody’s predicts that home prices could be as much as 10% lower in New Jersey, New York and Illinois in 2019 than they would have been without the tax bill.

You Itemize and File Schedule A 

As already discussed, the standard deduction has increased from $6,350 to $12,000 for individuals and for married couples filing separately, from $9,350 to $18,000 for heads of household, and from $12,700 to $24,000 for married couples filing jointly.

This change means many households that used to itemize their deductions using Schedule A will now take the standard deduction instead, simplifying tax preparation for an estimated 30 million Americans, according to USA Today. The Joint Committee on Taxation estimates that 94 percent of taxpayers will claim the standard deduction starting in 2018; about 70 percent claim the standard deduction under current law. Not filing schedule A  means less record keeping and less tax-prep time. But it also means charitable contributions will effectively no longer be tax deductible for many taxpayers because they won’t itemize.

Taxpayers who continue to itemize need to be aware of changes to many Schedule A items beginning with the 2018 tax year.

  • Casualty and Theft Losses. These are no longer tax deductible unless they are related to a loss in a federally declared disaster area – think hurricane, flood and wildfire victims.
  • Medical Expenses. The threshold for deducting medical expenses temporarily goes back to 7.5% from 10%, and that change applies to 2017 taxes, unlike the bill’s other changes, which mostly don’t kick in until 2018. But the change only applies through 2019. After that, the 10% threshold returns. This change particularly helps those with low incomes and high medical expenses. If your adjusted gross income is $50,000, you’ll be able to deduct medical expenses that exceed $3,750. So if you paid $5,000 in medical expenses and you’re itemizing using Schedule A, you’ll be eligible to deduct $1,250 of your $5,000 in medical expenses.
  • State and local taxes.Taxpayers can deduct a maximum of $10,000 from the total of their state and local income taxes or sales taxes, and their property taxes (added together), a measure that might hurt itemizers in high-tax states such as California, New York and New Jersey. The $10,000 cap applies whether you are single or married filing jointly; if you are married filing separately, it drops to $5,000.
  • Eliminated Miscellaneous Deductions. Taxpayers lose the ability to deduct the cost of tax preparation, investment fees, bike commuting ($20/month) unreimbursed job expenses and moving expenses. can no longer be itemized.

Steps You Might Want to Take by the End of 2017

Prepay your property and school taxes, if possible. Note that the IRS has advised that prepayments must be based on actual assessments, not estimates based on last year’s payments.

Also look at these other items taxpayers can still claim deductions for on Schedule A through the 2017 tax year: personal property taxes, such as vehicle registration taxes; mortgage insurance premiums;  and miscellaneous expenses that exceed 2% of adjusted gross income, such as investment interest; unreimbursed employee expenses such as work travel and work-related education; and investment fees and safe deposit box fees if the box holds income-producing items like stocks and bond documents.

You Take a Personal Exemption

Well, pretty much everyone does. But that’s about to end. For 2017, the exemption amount is $4,050 each for individuals, spouses and dependents, including children. This amount is not subject to any income tax at all. What it does is lower your taxable income.

Starting in 2018, that exemption goes away. The exemption’s elimination might actually offset the doubling of the standard deduction for families since deductions and exemptions both reduce your taxable income. Here are three examples:

You’re Single, with No Children 

Standard deduction increases from $6,350 to $12,000.

Personal exemptions decrease from $4,050 to $0.

Old tax break: $10,400.

New tax break: $12,000.

You’re Married Filing Jointly, with No Children

Standard deduction increases from $12,700 to $24,000.

Personal exemptions decrease from $8,100 to $0.

Old tax break: $21,100.

New tax break: $24,000.

*If you itemized before, you got a $21,100 tax break for the standard deduction and your two personal exemptions, plus the amount you itemized, so you might not be coming out ahead under the new plan.

You’re Married Filing Jointly, with Two Children

Standard deduction increases from $12,700 to $24,000.

Personal exemptions decrease from $16,200 to $0.

Old tax break: $28,900.

New tax break: $24,000.

*The difference is not entirely offset by the increase in the child tax credit from $1,000 to $2,000 per child.

As these examples show, the bevy of changes to the tax code make it difficult to determine whether you will really save money or lose money until 2018 rolls around and you file your taxes. It may be easier to make adjustments for tax years 2019 through 2025.

You Have Children Under 17

The child tax credit will increase from $1,000 to $2,000 per child under age 17. It’s also refundable up to $1,400, which means that even if you don’t owe tax because your income is too low, you can still get a partial child tax credit. The bill also makes the tax credit more widely available to the middle and upper class. In 2017, single parents can’t claim the full credit if they earn more than $75,000 and married parents can’t claim it if they earn more than $110,000. Those thresholds are increasing to $200,000 and $400,000 from 2018 through 2025.

As for age, current law applies to children under age 17; the tax bill doesn’t change the age threshold for the child tax credit.

But it does change the situation for undocumented immigrant parents. Under current law, undocumented immigrants who file taxes using an individual taxpayer identification number can claim the child tax credit. The new law will require parents to provide the Social Security number for each child they’re claiming the credit for – a move that seems designed to prevent even undocumented immigrants who pay taxes from claiming the credit. In addition, the broader exposure that children’s SSNs will receive makes their numbers more susceptible to identity theft, and people might make more use of stolen SSNs to claim the credit in the first place. (See Protect Your Kids Against Identity Theft and Identity Theft: How Much Should You Worry?)

You Have Children in Private School

One big change: 529 plans have been expanded. In addition to using them to fund college expenses, parents may now use $10,000 per year from 529 accounts tax free to pay for K-12 education tuition and related educational materials and tutoring. (For details see, Why You Should Front-Load Your 529 Plan.)

You Care for Elderly Relatives or Have Kids 17+

For dependents who don’t qualify for the child tax credit, such as college-aged children and dependent parents, taxpayers can claim a nonrefundable $500 credit, subject to the same income limits as the new child tax credit (explained in the “Children Under 17” section, above). Under current law, taxpayers can claim an exemption for qualifying relatives who meet dependent standards, which include having gross income of less than $4,050 and receiving more than half of their support from you.

You Buy Health Insurance Through the Affordable Care Act

The Republicans got their wish to see the individual health insurance mandate repealed. This change, which becomes effective in 2019, not 2018, means that from 2019 on, people who don’t buy health insurance will not have to pay a fine to the IRS. This freedom of choice also means that individual insurance premiums could increase by 10%, and 13 million fewer Americans could have coverage, according to the Congressional Budget Office.

Premium increases will likely affect everyone who buys insurance, including people who get it through their employers and employers who subsidize their employees’ premiums. (For related reading, see How Obamacare Can Be Repealed.)

You’re the Dependent or Spouse of Someone with a Student Loan

Federal and private student loan debt discharged from death or disability will not be taxed from 2018 through 2025. This change will be a big help to unfortunate families.

Let’s say you’re married and you have $30,000 in student loan debt. Under the old law, if you died or became permanently disabled and your lender discharged your debt, reducing it to zero, you or your estate would receive an income tax bill on that $30,000. If your marginal tax rate was 25%, your heirs or survivors would owe $7,500 in taxes. Tax reform eliminates that burden. But it doesn’t require private lenders to discharge debt. (For more on this topic, see What Happens to Your Student Debt If You Die?)

You Have (or Will Inherit) a Large Estate

The current federal estate-tax exemption thresholds are $5.49 million for individuals and $10.98 million for married couples. If you die with assets worth less than those amounts, you don’t owe any estate tax. From 2018 through 2025, the thresholds double to nearly $11 million for individuals and nearly $22 million for couples. (L33) Some folks may wonder whether hospitals will see an increased use of life-support machines by the very wealthy through the end of 2017 – and a decreasing use of them in December 2025.

According to Tax Foundation estimates, about 5,500 households will owe estate tax in 2017, and they will owe a total of $19.9 billion after credits. And raising the estate-tax exemption saves the few households affected about $10 billion, or costs the government about $10 billion, depending on how you look at it.

The top estate-tax rate remains 40%. The estate tax uses a bracketed system with increasing marginal rates, just like the individual income tax does. It starts at less than 17%, but escalates quickly. Once your taxable estate (the amount beyond the exemption) reaches six figures, you’re already in the 30% bracket.

The Big Question: How Will Your Tax Bracket Change?

That depends. Tax rates are changing from 2018 through 2025 across the income spectrum. In 2026, the changes will expire and current rates will return, absent further legislation, though the tax brackets will have changed slightly due to inflation. The individual cuts were not made permanent. The reason given: their effect on increasing the budget deficit.

The Tax Policy Center projects that everyone, on average, will save money from the tax-bracket changes. In 2018, the fourth quintile and the top 80%–95% of income earners will receive an average tax cut of about 2%. The top 95%–99% are the biggest winners, with an average tax cut of about 4%. The top 1% will see an average tax cut of a little less than 3.5%, while the top 0.1% will receive an average tax cut of a little more than 2.5%.

The new tax brackets eliminate the marriage penalty. The income brackets that apply to each marginal tax rate for married couples filing jointly are exactly double those for singles. Previously, some couples found themselves in a higher tax bracket after marriage. (To learn how it’s been up to now, see Why Marriage Makes Financial Sense.)

Read on to see how it will affect your bracket. Note that there is some overlap among where people fit in the income spectrum.

High-Income Households

The Tax Policy Center’s analysis shows that the biggest benefits will go to households earning $308,000 to $733,000. And those who earn more than $733,000 can expect a $50,000 tax cut.

Note that the top 20% pay nearly 87% of all the federal income tax the government collects, according to the Tax Policy Center. The top 1% pay more than 43% of it, and the top 0.1% pay more than 20% of it.

The table below shows how high-income earners will see their tax brackets change from 2018 through 2025.

Federal Individual Income Tax Rates for High-Income Earners, 2017 vs. 2018

Middle-Income Households

In 2018, according to the Tax Policy Center, the second quintile of income earners will get an average tax cut of a little over 1%. The third quintile will get an average tax cut of about 1.5%. Overall, middle income families can expect to save an average of $900 in taxes.

The table below shows how middle-income earners will see their tax brackets change in 2018 through 2025.

Federal Individual Income Tax Rates for Middle-Income Earners, 2017 vs. 2018

The Tax Policy Center says about 90% of middle-income households will have a lower tax bill, while 7% will have a higher one. Households in the third and fourth quintiles pay about 17% of all federal income taxes.

Low-Income Households

The Tax Policy Center estimates that almost half of low-income households will not see their tax liability changed under the tax bill.  And it estimates that in 2018, the lowest quintile of income earners would get an average tax cut of less than 0.5%, while the second quintile will get an average tax cut of a little over 1%.

Note that many in the lowest brackets don’t earn enough to owe federal income tax. The Tax Policy Center says that the lowest 20% of income earners get 2.2% back in total federal income taxes paid each year, with an average tax bill of –$643. The second lowest 20% are in a similar situation. However, lower-income workers still pay Social Security and Medicare taxes, even if they don’t always pay federal income taxes. The table below shows how low-income earners will see their tax brackets change from 2018 through 2025.

Federal Individual Income Tax Rates for Low-Income Earners, 2017 vs. 2018

Tax Brackets and Inflation

The tax bill also changes how tax brackets are increased for inflation. They will now be indexed to a slower inflation measure called the Chained Consumer Price Index for All Urban Consumers, certain tax breaks would also grow more slowly. This means households will see their tax bills go up faster, all else being equal. The lower rate of annual tax bracket increases for inflation will act as a tax that will fall hardest on the households with the least wiggle room in their budgets.

You Own a Pass-Through Business – Or Could

A pass-through business pays taxes through the individual income tax code rather than through the corporate tax code. Sole proprietorships, S corporations, partnerships and LLCs are all pass-through businesses; C corporations are not. According to the New York Times, nearly 40 million taxpayers in 2014 claimed pass-through income.

Under the new tax code, pass-through business owners will be able to deduct 20% of their business income, which will lower their tax liability if they are in a higher individual tax bracket. However, professional-services business owners such as lawyers, doctors and consultants filing as single and earning more than $157,500 or filing jointly and earning more than $315,000 face a phase-out and a cap on their deduction. Other types of businesses that surpass these earnings thresholds will see their deduction limited to the higher of 50% of total wages paid or 25% of total wages paid plus 2.5% of the cost of tangible depreciable property, such as real estate. Independent contractors and small business owners will benefit from the pass-through deduction, as will large businesses that are structured as pass-through entities, such as certain hedge funds, investment firms, manufacturers and real estate companies.

Some salaried employees might want to set themselves up as independent contractors to save on taxes, if their employers are amenable. But those employees should be aware that they will then become responsible for the employer’s share of Medicare and Social Security taxes and for their own health insurance and other benefits. They won’t necessarily come out ahead.

Both pass-through and corporate business owners will be able to write off 100% of the cost of capital expenses from 2018 for five years instead of writing them off gradually over several years. (L44) That means it will be less expensive for businesses to make certain investments.

You Own (or Work for – or Invest in) a Multinational

Tax reform changes the U.S. corporate tax system from a worldwide one to a territorial one. This means U.S. corporations will no longer have to pay U.S. taxes on most future overseas profits. (L44) Under the current system, U.S. corporations pay U.S. taxes on all profits no matter what country they are earned in.

The tax bill also changes how repatriated foreign earnings are taxed. When U.S. corporations bring profits held overseas back to the United States, they will pay a tax of 8% on illiquid assets such as factories and equipment, and 15.5% on cash and cash equivalents. The tax is payable over eight years. Both new rates represent substantial drops from the current rate of 35%. In addition, the anti-base-erosion and anti-abuse tax intends to discourage U.S. corporations from shifting profits to lower-tax countries moving forward.

Although these cuts will also how much corporate tax is applied to the deficit, they do not expire starting in 2026 as the individual cuts do.

Tax-bill proponents point out that Americans who own  stocks, mutual funds or exchange-traded funds in their retirement and investment accounts will also profit from these changes.The reason: Their investments rise in value when multinational stocks rise in value. They also note that the current system of worldwide taxation harms Americans by sending jobs, profits and tax revenue overseas by effectively double-taxing foreign-earned income. Most developed countries use a territorial system, and the United States will join them starting Jan. 1. This could result in fewer companies relocating overseas to lower their taxes.

You Own (or Work for – or Invest in) a Corporation

Corporations, like individuals and estates, pay tax under a bracketed system with increasing marginal rates. In 2017, those rates are as follows:

Source: IRS.gov

Starting in 2018, the corporate tax will be a flat rate of 21% – permanently. Since it’s a flat rate that’s lower than most of the current marginal rates, most corporations will have a lower federal tax bill. Those with profits under $50,000 will have a higher tax bill because their rate will increase from 15% to 21%.

According to an analysis by the Wall Street Journal, the types of companies most likely to benefit from the lower corporate rates are retailers, health insurers, telecommunications carriers, independent refiners and grocers. Aetna, for example, has a median effective tax rate of 35% over the last 11 years according to MarketWatch’s Corporate Tax Calculator, while Time Warner has paid 33%, Target has paid 34.9% and Phillips 66 has paid 31.3%.

As with the changes in how foreign profits are taxed, the changes in how corporate profits are taxed will affect everyone who owns shares of a corporation through stocks, mutual funds or exchange-traded funds. Retirement account values, for example, could rise as a result of the lower corporate rate.

The top marginal tax rate for U.S. corporations under current law is 35%; the global average is 25%. Critics have long contended that America’s high corporate tax rates put the country at a competitive disadvantage compared to lower-tax nations such as Ireland and Canada, pushing American corporations’ profits overseas. In theory, now that rates are lower, companies might allow more profits to be earned domestically and they might spend fewer resources lobbying for lower tax rates and more resources on improving their products and services. (For more, see Do U.S High Corporate Tax Rates Hurt Americans?)

Also, the corporate alternative minimum tax of 20% has been repealed.

You’re Unemployed

Republicans say the tax bill will create jobs through a lower tax rate on repatriated profits. But critics such as Senator Mark Warner (D-Va.) say that higher corporate profits don’t translate into more jobs or more domestic investment.

Given that Congress’s 2004 tax holiday failed to deliver on a similar promise, the new bill may not deliver the promised job growth. The additional money in corporate coffers may instead be paid to shareholders through dividends and share repurchases, as it was earlier this century. Companies could also use it to pay down debt or undertake mergers.

The Tax Foundation’s models, however, found that the tax plan should increase GDP by 1.7% over the long term, increase wages by 1.5%, and add 339,000 full-time equivalent jobs. They say GDP will grow by an average of 0.29% per year over the next decade, an increase from 1.84% to 2.13%. They also expect the growth generated by the tax cuts to increase federal revenues by $1 trillion.

You’re a Tax Preparer, Tax Attorney or Accountant

Starting already, tax preparers, tax attorneys and accountants can expect a boost in business from clients seeking to maximize benefits or limit damage from the tax-code changes. They’ll be busy between now and the end of the year advising people on steps to take by December 31, 2017, such as prepaying property taxes and making next year’s charitable donations this year if they won’t be itemizing (or will be in a lower bracket) next year. They’ll also be busy next year helping people set up pass-through businesses and reevaluating their clients’ circumstances in light of all the tax changes. Tax preparers who primarily work for low- and middle-class tax payers may see a drop in business, however, since fewer of those households will benefit from itemizing their deductions.

Looking at the Future: What’s Permanent, What Isn’t

All the individual changes to the tax code are temporary, including the 20% deduction for pass-through income. Most changes expire in 2026; a few, like the reduced medical-expense threshold, expire sooner. The corporate tax rate cut, international tax rules and the change to a slower measure of inflation for determining tax brackets are permanent.

High-Profile Issues the Tax Bill Didn’t Change

You’ve been reading news stories about tax-bill controversies since the House released its first version on Nov. 2. Different groups who stood to gain or lose significantly fought hard to protect their interests.

Grad students felt threatened by the possibility that their tuition waivers would be taxed. Many graduate schools don’t charge tuition to students who teach or work as research assistants. Students were opposed to getting tax bills for income they never received. The average graduate tuition in 2015–16 was $17,868, so depending on what tax bracket the grad student fell into, the tax bill might have been several thousand dollars. Grad students will continue to receive this tuition benefit tax free. And anyone with student-loan debt will still be able to deduct the interest, even if they no longer itemize because of the higher standard deduction.

Teachers also worried about losing their up to $250 deduction for classroom and certain job-related expenses. They didn’t. They can take this deduction whether they itemize deductions or take the standard one.

The low-income housing tax credit was saved.  The president of the National Low Income Housing Coalition told NPR that a provision of the bill that would have revoked the tax-exempt status of private activity bonds, a benefit that encourages investment in affordable housing construction by lowering its cost, would have meant “a loss of around 800,000 affordable rental homes over the next 10 years.”  These bonds are also used to finance infrastructure projects such as roads and airports.

The act failed to reduce the number of tax brackets to 4, which would have simplified the tax code – a major part of Paul Ryan’s original proposal to make taxes so easy that most Americans could file them on a postcard. We still have 7 tax brackets.

The act also failed to eliminate the individual alternative minimum tax. But it did increase the threshold for paying the AMT so fewer taxpayers will be affected by it.

The House bill wanted to eliminate medical-expense deductions, but the final bill keeps it and provides a small boost for three years, as noted above in “You Itemize and File Schedule A.”

The earned income tax credit, which gives a tax break to the working poor, was not expanded.

And, in the end, the expansion of 529 plans to cover K-12 education did not include homeschooling.

The Bottom Line

The tax bill will affect us all from 2018 through 2025 and beyond. It will change how much money is in our bank accounts after each time we get paid and after we file our taxes each year. Some of us will have lower tax bills and be able to pay off our debts faster or put more money in our retirement accounts. Some of us will have higher tax bills and we might have a harder time making ends meet or saving for the future. If health insurance premiums increase significantly because of the mandate repeal, any tax savings could be moot. And because many of the bill’s provisions require IRS guidance and must go through a rule-writing process, we may not even know for sure exactly what we’re dealing with until sometime next year. Stay tuned.

By Amy Fontinelle | Updated January 3, 2018 — 12:23 PM EST