The Tax Cuts and Jobs Act brings a host of changes to tax returns for 2018. Highlighted are just a few of the new rules that may impact many of our clients. Please reach out to us to find out if and how your personal situation is impacted.
· A flat 21% corporate tax rate for C corporations replaces the 15% - 35% graduate rate structure.
· 100% bonus depreciation for property purchased 9/2017 – 2022. This is also available for the purchase of used equipment. Qualified section 179 property now includes heating and cooling systems and property improvements. There are also shorter depreciation lengths for certain types of real estate properties.
· A new 20% “deduction of “qualified business income” for operating businesses that are not C corporations. Over certain income levels, the computation uses wages paid by the business and un-adjusted basis of assets. Specified service businesses are subject to various limitations and phased out of this deduction.
· A new credit for paying wages to employees that are on Family and Medical Leave.
· Entertainment Expenses are no longer deductible for tax purposes, and food deduction is limited to 50%.
· Gain or loss from sale of patents or other self-created assets will not get capital gain treatment.
· Elimination of domestic production activities deduction.
· New Income Tax rates: 10, 12, 22, 24, 32, 35, 37 – Rates are lower, and brackets are broader.
· Expanded child tax credits – up to 2,000, with higher phase-outs.
· Higher standard deductions $24,000 joint filers, $12,000 for single
· Loss of personal exemptions.
· Major changes impacting home mortgage interest and deduction of home equity loan interest – Deduction of interest on home equity loans is suspended and deduction for mortgage interest is limited to debt of up to $750,000. Old mortgages are grandfathered in.
· State and Local tax deduction is limited to $10,000.
Miscellaneous itemized deductions are suspended – including un-reimbursed employee expenses, investment expenses, tax preparation and professional fees.
· Moving expenses – deduction is now only available to military personnel.
· AMT – Higher exemption amounts and limits for alternative minimum tax $109,400 and $1 million for joint filers.
· A 5 year deferral is available for gains resulting from stock options.
· Alimony – Staring in 2019, no deduction for alimony.
The overall effects of the changes in the tax law will vary for each taxpayer. We are expecting additional guidance and clarification from the authorities so that we are better able to help clients plan and prepare for the year ahead.
We are happy to work with you to come up with a plan. Give us a call.