New Tax Law Changes

Taxpayers need to be aware of basic changes even if a professional does their returns for them.  

Some of the new laws are good for your income bracket and some aren’t so good.  Of course you should seek out a CPA to help with your year end taxes.

Tax Provisions Affecting Individuals for 2018
  • There are still seven tax brackets, but the tax rates are lowered to 10%, 12%, 22%, 24%, 32%, 35%, and 37%.
  • The standard deduction has almost doubled from the prior year to $12,000 for individuals and to $24,000 for married couples.
  • Personal and dependency exemptions are eliminated.
  • Child Tax Credit has increased to $2,000 and expands the refundable tax portion of the credit to $1,400.
  • Alternative Minimum Tax (AMT) exemption amount has been increased to $109,400 for married filling joint and surviving spouses and $70,300 for other filers.
  • Individual Healthcare Mandate penalty has been eliminated for individuals who fail to maintain minimum essential health care coverage, but only for years after 12/31/2018. The penalty is still applicable for 2018.
  • Earned Income Tax Credit is still available for low to middle-income wage earners, which can be over $6,000 for a family with three kids.
  • Taxpayers, who itemize, can deduct up to $10,000 in state and local income taxes, sales tax and real estate taxes.
  • Mortgage interest deduction is capped on new home loans of $750,000, and no longer includes home equity line of credit (HELOC) interest.
  • A deduction is allowed for qualified medical expenses in excess of 7.5% of adjusted gross income.
Tax Provisions Affecting Business Owners for 2018
  • Lowers the corporate tax rate to 21%, and the tax rate for Personal Service Corporations is also lowered to 21%.
  • Repeals Corporate Alternative Minimum Tax (AMT).
  • Allows sole proprietors and passthrough businesses a 20% deduction of its Qualified Business Income (QBI). Specified Service Trades and Businesses (SSTB) are not eligible for the deduction, if the taxpayer’s taxable income before the QBI deduction is over $415,000 if filing MFJ or over $207,500 if filing Single, HOH, or MFS.
  • Expands the limits on cash accounting and removal of some of the requirements to track inventory.
  • Allows businesses to fully expense qualified purchases for the 5 years after 2017.

 

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