There are significant changes to our current tax code effective January 1, 2018. I have outlined many of the major changes that may affect you as my client;

  1. Individual tax rates have changed to 10%, 12%, 22%, 24%, 32%, 35%, and 37% from the prior rates of 10%, 15%, 25%, 28%, 33%, 35%, and 39.6%.
  2. The Kiddie Tax has changed so that unearned (investment) income is to be taxed at trust rates instead of the parent’s rate. That would 10% on taxable income up to $2,550, and then 24% from $2,551 to $9,150, then going to 35% and 37%
  3. The new standard deductions are now $24,000 for joint filers, $12,000 for separate and single filers, and $18,000 for head of household filers.
  4. Personal exemptions have been repealed. For 2017, the personal exemption is $4,050 per person subject to phase out. $0 in 2018.
  5. The child tax credit is increased to $2,000 per child under the age of 17 subject to phase out at $400,000 for joint filers, and $200,000 for single filers. The old child tax credit was $1,000 per child phased out at $110,000 for joint filers, and $75,000 for single filers.
  6. They have repealed the AGI phase out for itemized deductions.
  7. They have repealed the miscellaneous itemized deductions subject to the 2% floor. These are things like accounting or investment fees, safety deposit boxes, unreimbursed employee expenses, union dues, job education expenses.
  8. Home mortgage interest acquisition indebtedness incurred after December 15, 2017 is limited to $750,000 of principal indebtedness, down from $1,000,000. Married filing separate filers would be limited to $375,000.
  9. Home equity indebtedness is no longer deductible mortgage interest.
  10. There is now a $10,000 ($5,000 for married filing separately) limit on the amount of state and local property and income taxes that you can claim as an itemized deduction.
  11. The deduction for personal casualty and theft losses has been repealed.
  12. Alimony payments for divorces executed after December 31, 2018 are no longer deductions or income.
  13. Moving expenses deduction and reimbursement has been eliminated.
  14. The unified exclusion for estate tax is now $11,200,000.
  15. Alternative minimum tax exemptions have been increased to the following; $109,400 for joint filers, $70,300 for single and head of household filers, $54,700 for married filing separate filers.
  16. AMT exemption phase-out beginning AMTI thresholds have been increased as follows; $1,000,000 for joint returns, $500,000 for single, separate or head of household.
  17. The shared responsibility payment for individuals has been repealed starting in 2019.
  18. C corporation income tax rates are a flat 21%.
  19. There is a new 20% deduction for Qualified Business Income if your joint taxable income is lower than $315,000 or $157,500 for anyone else. You may still be eligible to claim the deduction if your taxable income is over that amount with limitations.
  20. Businesses with average gross receipts of $25 million or less would be permitted to use the cash method of accounting regardless of industry or amount of inventory.
  21. Business interest is capped at interest income plus 30% of business adjusted taxable income plus floor plan financing interest.
  22. Net Operating Losses will generally not allowed to be carried back anymore, and will be limited to 80% of taxable income and then carried over.
  23. Like-kind exchanges are allowed for real property only.
  24. The domestic production activities deduction has been repealed.
  25. Deductions for entertainment, amusement, recreation, membership dues to any club organized for business, pleasure, recreation, or social purpose has been repealed.
  26. The 100% deduction for meals provided to employees on employer’s premises is now reduced to a 50% limitation.
  27. Partnership technical terminations have been repealed.
  28. There is a new general business credit for employers that allow at least 2 weeks and up to 12 weeks credit for 12.5% of wages paid at 50% normal pay, and 25% at 100% normal pay.
  29. The 10% rehabilitation credit for pre-1936 buildings has been repealed.

At Brader Greene, we want to educate all of our clients about the tax laws and how they affect you. Please let us know if you have any questions, or need clarification on any point. We look forward to working with you.