Tax Code 2017/18: Rates, Deductions, and Corporate Changes

The 2017 tax reform changes, enacted through the Tax Cuts and Jobs Act signed on December 22, 2017, restructured individual income tax brackets, nearly doubled the standard deduction, eliminated personal exemptions, cut the corporate rate to a flat 21 percent, expanded the Child Tax Credit, and rewrote the rules for dozens of deductions starting with the 2018 tax year. Most individual provisions were originally scheduled to expire after 2025, but the One Big Beautiful Bill Act (OBBBA), enacted in July 2025, made the vast majority of them permanent with inflation adjustments going forward.¹ So the changes below are, with one significant exception, the tax code you’re filing under now.

Lower Individual Income Tax Rates

The reform kept seven brackets but lowered five of the seven marginal rates. The old rates of 10, 15, 25, 28, 33, 35, and 39.6 percent became 10, 12, 22, 24, 32, 35, and 37 percent.² The top rate dropped from 39.6 to 37 percent and applied at a higher income threshold than before: in 2018, $500,000 for single filers and $600,000 for joint filers, compared with roughly $418,400 and $470,700 under the prior law.

These rates are now permanent, with brackets adjusted for inflation each year. For 2026, the 37 percent bracket starts at $640,600 for single filers and $768,700 for joint filers, and the 10 percent bracket covers the first $12,400 of taxable income for single filers ($24,800 joint).¹ These are marginal rates, so only the slice of income above each threshold gets taxed at the higher rate.

The individual Alternative Minimum Tax survived the reform but with much higher exemption amounts and phase-out thresholds, which pulled most upper-middle-income filers out of its reach. For 2026, the exemption is $90,100 for single filers and $140,200 for joint filers, phasing out starting at $500,000 and $1,000,000.³ Those higher thresholds are now permanent.

A Bigger Standard Deduction, No More Personal Exemptions

The most visible change for everyday filers was the near-doubling of the standard deduction. In 2017 the standard deduction was $6,350 single, $12,700 joint, and $9,350 for heads of household. For 2018 those jumped to $12,000, $24,000, and $18,000.⁴ The goal was to push more filers toward the standard deduction and away from the complexity of itemizing.

The trade-off: personal exemptions, worth $4,050 per person in 2017, were eliminated. A married couple with three children had been able to subtract $20,250 on top of their standard or itemized deductions. That went to zero starting in 2018.⁴ Smaller households usually came out ahead; larger families sometimes lost ground, though the expanded Child Tax Credit was meant to offset the gap.

Both changes are now permanent. For 2026, the inflation-adjusted standard deduction is $16,100 single, $32,200 joint, and $24,150 for heads of household, and the personal exemption remains at zero.¹

An Expanded Child Tax Credit and a New Credit for Other Dependents

The Child Tax Credit doubled from $1,000 to $2,000 per qualifying child under 17 starting in 2018. Up to $1,400 of that was refundable through the Additional Child Tax Credit for families whose tax liability was too low to use the full amount, provided they had at least $2,500 in earned income.⁵

The income phase-out thresholds also jumped: from $75,000 single and $110,000 joint under prior law to $200,000 and $400,000. That was a large expansion in who could claim the credit, since many dual-income households had already phased out under the old thresholds.⁵

The reform also created a new $500 nonrefundable Credit for Other Dependents for people who don’t qualify for the Child Tax Credit. This covers dependents age 17 and older, elderly parents you support, and other qualifying relatives who are U.S. citizens, nationals, or resident aliens. The same $200,000/$400,000 phase-out applies.⁶

For 2026, the OBBBA raised the Child Tax Credit to $2,200 per qualifying child, with up to $1,700 refundable. The $2,500 earned income threshold for the refundable portion still applies.

Itemized Deductions That Shrank or Disappeared

If you still itemize, the 2017 reform reshaped what qualifies.

The SALT Deduction Cap

Before 2018 you could deduct the full amount of state and local income, sales, and property taxes you paid. The reform capped the combined deduction at $10,000 regardless of filing status. The OBBBA raised that cap to $40,000 for 2025 and $40,400 for 2026, with a one-percent annual increase through 2029. After 2029, the cap drops back to $10,000.⁷ Married individuals filing separately get half the applicable amount. This is the biggest scheduled reversion still on the books, so households in high-tax states should plan around it.

Mortgage Interest

For mortgages taken out after December 15, 2017, interest is deductible on the first $750,000 of acquisition debt, down from $1,000,000. Loans originated on or before that date keep the old $1 million cap.⁸ Interest on home equity debt used for anything other than improving the home is no longer deductible. The $750,000 cap is now permanent.

Miscellaneous Deductions and Casualty Losses

The reform eliminated miscellaneous itemized deductions subject to the two-percent-of-AGI floor. Unreimbursed employee business expenses, tax preparation fees, and investment advisory costs no longer qualify.⁹ Employees who used to deduct work-related travel or specialized equipment lost that write-off entirely. The elimination is now permanent.

Casualty and theft loss deductions were narrowed to losses from federally declared disasters.¹⁰ Starting in 2026, the OBBBA expanded the rule to also cover losses from state-declared disasters.¹¹ Everyday accidents and localized events that don’t trigger a federal or state disaster declaration still get no deduction.

Alimony and Moving Expenses

Two changes are easy to overlook.

For any divorce or separation agreement executed after 2018, alimony payments are no longer deductible by the payer and no longer taxable income for the recipient. Agreements finalized before 2019 keep the old treatment unless a later modification specifically adopts the new rule.¹² That shift changes who bears the tax on those payments and matters in divorce negotiations.

The moving expense deduction was suspended for non-military taxpayers starting in 2018, and the OBBBA made that suspension permanent. Only active-duty military members relocating under orders can still deduct moving costs.

Corporate and Business Tax Rules

The business-side changes were designed as permanent from the start, and the OBBBA confirmed that.

A Flat 21 Percent Corporate Rate

The old corporate tax was a graduated system topping out at 35 percent. The reform replaced it with a flat 21 percent rate on all corporate taxable income.¹³ The corporate Alternative Minimum Tax was repealed entirely.

The Section 199A Pass-Through Deduction

Owners of S-corporations, partnerships, and sole proprietorships gained a new deduction of up to 20 percent of qualified business income, claimed on the owner’s personal return.¹⁴ The OBBBA made this deduction permanent.¹⁵

Eligibility narrows for owners of specified service businesses like law firms, medical practices, and accounting firms. For 2026, their deduction begins to phase out when taxable income exceeds $201,750 single or $403,500 joint, and disappears entirely at $276,750 and $553,500. Non-service businesses face a different limit: the deduction can’t exceed the greater of 50 percent of W-2 wages paid or 25 percent of wages plus 2.5 percent of the cost basis of qualified business property.¹⁴

Net Operating Losses and Bonus Depreciation

The reform ended the practice of carrying net operating losses back to prior years. Losses now carry forward indefinitely, but the deduction for carried-forward losses in any given year is capped at 80 percent of that year’s taxable income.¹⁶ A business with $1 million in taxable income and $2 million in accumulated losses can offset only $800,000, owing tax on the remaining $200,000.

The reform also introduced 100 percent bonus depreciation, allowing immediate expensing of qualifying equipment and certain property. That provision had begun phasing down after 2022, but the OBBBA restored full expensing permanently.

Estate and Gift Tax Exemption

The reform roughly doubled the lifetime estate and gift tax exemption from a $5 million base (inflation-adjusted) to $10 million. By 2025 the inflation-adjusted figure had climbed to $13.99 million per person. The OBBBA raised the exemption further to $15 million per individual for 2026, indexed for inflation going forward.¹⁷ For married couples, the combined exemption reaches $30 million through portability. The rate on amounts above the exemption remains 40 percent, and the generation-skipping transfer tax exemption tracks the same figures. The IRS confirmed in 2019 that gifts made under the higher exemption are protected from any “clawback” if the law later changes.

What’s Permanent Now and What Still Has a Sunset

The 2025 OBBBA resolved most of the uncertainty around the reform’s original sunset date. The lower individual rates, higher standard deduction, eliminated personal exemption, expanded Child Tax Credit, Section 199A deduction, disallowed miscellaneous itemized deductions, $750,000 mortgage interest cap, narrowed casualty loss rule, higher AMT thresholds, and $15 million estate tax exemption are all permanent.³

The main exception is the raised SALT cap. The $40,400 limit for 2026 grows by one percent annually through 2029, then drops back to $10,000 for 2030 and beyond unless Congress acts again.⁷ If your state and local tax bill is well above $10,000, that reversion is the date to circle.

1
Internal Revenue Service. IRS Releases Tax Inflation Adjustments for Tax Year 2026, Including Amendments From the One, Big, Beautiful Bill
2
Congress.gov. H.R.1 – An Act To Provide for Reconciliation Pursuant to Titles II and V of the Concurrent Resolution on the Budget for Fiscal Year 2018
3
Tax Foundation. 2026 Tax Brackets and Federal Income Tax Rates
4
Internal Revenue Service. Publication 501 – Dependents, Standard Deduction, and Filing Information
5
Internal Revenue Service. Publication 972 – Child Tax Credit and Credit for Other Dependents
6
Internal Revenue Service. Understanding the Credit for Other Dependents
7
Office of the Law Revision Counsel. 26 USC 164 – Taxes
8
Internal Revenue Service. Publication 936 – Home Mortgage Interest Deduction
9
Internal Revenue Service. Publication 529 – Miscellaneous Deductions
10
Internal Revenue Service. Topic No. 515, Casualty, Disaster, and Theft Losses
11
Congress.gov. The Nonbusiness Casualty Loss Deduction
12
Internal Revenue Service. Topic No. 452, Alimony and Separate Maintenance
13
Office of the Law Revision Counsel. 26 U.S. Code 11 – Tax Imposed
14
Office of the Law Revision Counsel. 26 U.S. Code 199A – Qualified Business Income
15
Internal Revenue Service. Qualified Business Income Deduction
16
Tax Policy Center. How Did the Tax Cuts and Jobs Act Change Business Taxes?
17
Internal Revenue Service. Estate and Gift Tax FAQs