This new tax law information comes from T.M. Byxbee.
Tax Cuts and Job Acts (TCJA)
As many of you are aware the new tax law has made many changes that will be effective January 1, 2018. Some of the changes are listed below.
Tax rates have decreased approximately 3% with higher income brackets receiving a 4 to 5 % decrease.
Personal exemptions have been eliminated through 2025.
The standard deduction has increased through 2025 to $24,000 for married individuals filing a joint return, $18,000 for head of household and $12,000 for all others. These amounts will be adjusted for inflation.
The child tax credit is increased to $2,000 per child under age 17.
The total itemized deduction for state income taxes or sales taxes and real estate taxes is limited to $10,000. Clients may want to consider prepaying their 2018 property taxes prior to December 31, 2017 in order to take a deduction this year. You would need to verify with your local government if they are accepting this payment. NOTE – if you are typically subject to the Alternative Minimum Tax (AMT) this action may not be advisable.
The deduction for mortgage interest on new mortgages is limited to mortgage debt up to $750,000. Taxpayers having a binding written contract for a mortgage signed prior to December 15, 2017 and closing before April 1, 2018 will be allowed to deduct mortgage interest on debt up to $1,000,000. The deduction for home equity debt is eliminated through 2025.
Charitable contributions to public charities and certain private foundations are allowed up to 60% of adjusted gross income. Any excess can be carried forward 5 years.
The exclusion for qualified moving expenses reimbursements or moving expense deduction is eliminated through 2025 except for members of the armed services on active duty who move pursuant to a military order and incident to a permanent change of station.
Personal casualty and theft losses have been eliminated through 2025 except for personal casualty losses incurred in a federally-declared disaster area.
Miscellaneous itemized deductions subject to the 2% limitation have been eliminated through 2025.
Medical expenses can be deducted for all taxpayers to the extent they exceed 7.5% of the taxpayer’s adjusted gross income for expenses incurred in 2017 and 2018.
There is a new deduction for 20% of qualified business income for sole proprietorships, partnerships, LLC companies and S corporations. This deduction does not apply to service businesses in the fields of health, law, accounting, actuarial services, performing arts, athletics, financial services, brokerage and consulting.
Alimony will not be taxable to the spouse receiving it and will not be deductible by the spouse paying it for divorce agreements executed after December 31, 2018.
The overall limitation on itemized deductions for higher income taxpayers has been eliminated through 2025.
The alternative minimum tax has been retained ; however the exemption amount has been increased.
The individual mandate to have health insurance has been eliminated.
Code section 529 college savings accounts can now be used for kindergarten through 12th grade expenses up to $10,000 per year.
The domestic production activities deduction has been eliminated.
The deduction for entertainment expenses has been eliminated.
An IRA that has been converted to a Roth IRA cannot be recharacterized back to an IRA.
The estate and gift tax exemption has doubled for decedents dying and gifts made through 2025 to $10.8M per individual beginning in 2018.
Click here to view this information on T.M. Byxbee.