The new tax law, the Tax Cuts and Jobs Act, has generated significant buzz as tax experts speculate on how the average American's tax bill will be affected. Some of the most important changes center on key deductions and credits that could have a significant impact on the younger generation of taxpayers. For millennials, the latest round of tax reform is a mixed bag.

9 Key Tax Law Changes Millennials Need to Know

The new tax bill institutes a wide range of changes, including increases and decreases to certain tax breaks as well as the elimination of others. Here are the ones set to have the most immediate impact on single young adults and young families. All of them go into effect with 2018 taxes and last through the 2025 tax year.

1. The Standard Deduction Is Increasing

A tax deduction reduces your taxable income, which may lower your tax liability. When you file your taxes, you have the option of itemizing your deductions—meaning you list each deductible expense separately—or taking the standard deduction.

Claiming this deduction usually makes sense if you file as single or are married filing jointly and your itemized expenses are less than what’s allowed for the standard deduction. For 2019, the standard deduction is $12,200 for single taxpayers, rising to $12,400 in 2020. For heads of households, the standard deduction is $18,350 in 2019, climbing to $18,650 in 2020. For married couples who file jointly, the standard deduction is $24,400 in 2019, rising to $24,800 in 2020. Those limits are nearly double what was allowed in 2017, meaning less income you pay taxes on.

2. Personal Exemptions Are Going Away

The old tax code allowed for taxpayers to claim personal exemptions. This is an amount you can deduct for yourself and each of your dependents. In 2017 the maximum personal exemption was $4,050. The higher standard deduction is designed to offset the loss of the personal exemption.

3. The Child Tax Credit Is Expanding

Deductions reduce your taxable income. Credits offer a tax benefit by reducing your tax liability on a dollar-for-dollar basis. The Child Tax Credit is available to families with qualifying children who fit within the income thresholds. For 2018 the credit doubles from $1,000 per child to $2,000. 

The tax bill also raises the phaseout limit to qualify. Now, married couples earning up to $400,000 can claim the credit, a huge jump from the $110,000 allowed by the old tax code. The tax bill also makes the first $1,400 of the credit refundable. That means you can still claim the credit even if you don't have any tax liability for the year. That’s something families couldn't do before. 

4. Mortgage Interest Deductions Are Capped Lower

Millennials who plan to buy a home between 2018 and 2025 will be affected by a reduction of the mortgage interest deduction. Going forward, the deduction limit applies to $750,000 of debt on your primary residence. If you bought a home before Dec. 15, 2017, you can still claim the deduction using the old limit of $1 million. This change would have the most impact on wealthier millennials or millennial real estate investors. 

One other thing to note if you're a millennial homeowner with a home-equity line of credit (HELOC). You can no longer deduct the interest if you used the funds for purposes other than buying, building or substantially improving your home. This is important, as surveys suggest millennial homeowners are more likely than older generations to use home equity loans to finance business ventures, big ticket purchases or taking a vacation. If home equity loans are used this way, the interest is no longer deductible.

5. The Student Loan Interest Deduction Remains Intact

The Internal Revenue Service allows you to deduct up to $2,500 in student loan interest each year. While there was talk of doing away with this deduction, the final version of the tax bill allows it to stand. That’s good news for the average graduate, whose typical monthly payment ranges between $200 and $299 per month.

6. Job Search and Moving Expense Deductions Disappear

When you're in your 20s and 30s, looking for work or making a major move to pursue a career opportunity may be par for the course. Now, unless you are an active member of the military, you will no longer be able to deduct any costs associated with these expenses going forward. Deductions for key job expenses, such as unreimbursed travel and mileage, are also now a thing of the past. However, business owners can still take deductions for business expenses including their office and business travel.

7. State and Local Tax Deductions Are Limited

The deduction for state and local taxes, including sales, income, and property tax, remains under the tax bill, but there are now limits. Deductions for these taxes can't exceed a total of $10,000, a blow to taxpayers in high cost-of-living states.

8. Commuters May Take a Hit

If your employer pays some of your commuting expenses, be prepared to cover those costs yourself from now on. The tax bill eliminates a deduction for companies that help with things such as transit, parking and bicycle commuting expenses. Your company could still offer commuter benefits, but the lack of a deduction means there's no longer an incentive for it to do so. 

9. Your Paycheck Could Be a Little Bigger

One of the aims of the tax bill is to increase the U.S. gross domestic product (GDP). The Congressional Budget Office expects the bill to boost average yearly real GDP by 0.7% between 2018 and 2028. That’s not a huge nudge, but for younger adults who may be trying to save a down payment on a home or plan for retirement every penny counts.

The Bottom Line

Remember, none of the changes listed above will impact how you file your 2017 taxes. Still, it's never too early in the year to begin thinking about how they'll affect you for next year's filing. Consider talking to a tax professional if you're not sure how to make the most of (and limit any damage due to) the new tax changes.