Summary of important changes due to the Tax Cuts and Jobs Act signed into law 12/22/2017
This list and analysis does not reflect all changes and is simply an overview. Anticipated impacts are hypothetical and will not apply to every taxpayer. Call us if you have questions at 267-498-5160. Most changes are effective for tax year 2018 (filed on returns during 2019) unless otherwise indicated. Most items revert back to prior law after 2025. This list is subject to change as a more complete analysis of the law becomes available.
Some changes and their possible impacts:
This list and analysis does not reflect all changes and is simply an overview. Anticipated impacts are hypothetical and will not apply to every taxpayer. Call us if you have questions at 267-498-5160. Most changes are effective for tax year 2018 (filed on returns during 2019) unless otherwise indicated. Most items revert back to prior law after 2025. This list is subject to change as a more complete analysis of the law becomes available.
Some changes and their possible impacts:
- Increased standard deduction
- Fewer people will need to itemize deductions. This also reduces the tax benefit of mortgage interest and charitable donations.
- Capped state/local income & RE tax deduction @ $10k
- Taxpayers that expect to owe state/local income taxes for 2017 (including Q4 estimates) should consider paying those taxes by 12/31/17. Those subject to AMT may not realize a benefit from this.
- Eliminated personal exemptions
- Greatest impact to families with children in college. Mostly offset by changes to child tax credit for families with kids < 17 years old
- Changes to child tax credit
- Increased the child tax credit to $2k per child
- Credit now phases out at higher income level
- Adjusted tax brackets
- Largely eliminates the marriage penalty (married tax bracket income is twice that of single tax brackets except for top tax bracket)
- Capped mortgage interest deduction for loans > $750k
- old loans grandfathered in @ $1 million
- Home equity loan interest is no longer deductible in many cases
- Only applies if you did a cash-out refi and used the cash for something other than improving your property
- Increased the exemption for AMT
- AMT will affect fewer people
- Added 20% deduction for pass-through business income
- In most cases, limited to 50% of W2 wages paid by the company
- Applies to sole proprietors, LLC’s, partnerships & S- Corps
- Deduction phases out for service- based businesses if income >$315-415k
- This does not affect AGI, but you don’t have to itemize to take this deduction
- Reduced C Corp tax rates to max rate of 21%
- Most clients will not benefit from switch to C Corp even with lower tax rate.
- Eliminated individual mandate penalty
- Effective for calendar year 2019. Penalty still applies for 2018!
