Tax Reform Changes - How will they affect you?
When you file your 2018 tax returns – about a year from now – your return will look very different. Here are a few of the biggest changes that may affect you.
Individual Tax
- Individual tax rates will range from 10% to 37%.
- Standard deduction increases and personal and dependent exemptions eliminated
- The Child Tax Credit increased and a new Dependent Credit created.
Disappearing deductions: Beginning with the 2018 tax year, you will no longer be able to deduct:
- State income tax and property taxes above $10,000 per year in total;
- Moving expenses (with an exception for certain military);
- Employee business expenses such as mileage, travel, entertainment, home office expenses, union dues, tax preparation fees, and investment fees, among others;
- Mortgage interest beyond interest on $750,000 of acquisition debt (if you buy a new home); and
- Mortgage interest paid on equity debt (all homeowners).
Some new benefits for individuals include:
- Medical expense Adjusted Gross Income (AGI) threshold will temporarily drop to 7.5% of AGI for 2017 and 2018;
- Alternative Minimum Tax (AMT) threshold increased;
- A deduction for qualified business income for passthrough entity owners;
- Recharacterization to an IRA cannot be used to undo a Roth conversion;
- The estate tax exclusion has increased to $10 million (adjusted for inflation); and
- Annual gift tax exclusion remains the same ($14,000 for 2017 and $15,000 for 2018), but the maximum rate on gifts is 35%.
Small Business Tax
- Corporate tax rate will be a flat 21% for 2018
- Up to 20% deduction from net business income for a sole proprietorship, LLC (excluding those taxed as a C corporation), partnership, S corporation, and rental activity. The rules are complex but there is a lot of planning that we can do to maximize this deduction for you.
- Corporate Alternative Minimum Tax (AMT) repealed;
- IRC §179 expensing and bonus depreciation increased;
- Deductible business interest reduced;
- The net operating loss (NOL) carryback repealed, NOL deduction amount limited;
- The domestic production activities deduction is repealed;
- IRC §1031 treatment is limited to certain real property; and
- Entertainment expenses are disallowed.
We are here if you would like to discuss how the changes apply to your unique situation >> Contact Us