- Tax Rates and brackets changed
- Standard Deduction amount increased
- Single or Married Filing Separately—$12,000.
- Married Filing Jointly or Qualifying Widow(er)—$24,000.
- Head of Household—$18,000.
- Personal Exemption Deduction was suspended.
- Itemized Deductions are no longer limited if your AGI is over a certain amount.
- Sales Tax and Property Tax is limited to a combined total of $10,000
- Miscellaneous Itemized Deductions subject to the 2%AGI limitation items (i.e. Unreimbursed job-related expenses, Investment Management Fees, Safety Deposit Box fee, ect…) are no longer deductible.
- Home Equity Indebtedness is no longer deductible and home mortgage interest is limited to interest on up to $750,000 of new home acquisition indebtedness.
- The Deduction for Charitable Contribution of Cash has increased to 60% of your AGI.
- Moving Expenses are no longer allowed unless you are active duty Military.
- Casualty Losses are only allowed if incurred in a “Federally Declared Natural Disaster”
- The maximum Child Tax Credit has increased to $2,000 per qualifying child and the maximum additional child tax credit increased to $1,400. The income threshold at which the credit begins to phase out is increased to $200,000 ($400,000 if married filing jointly).
- A new “Qualified Relative” Credit of $500 is available
- Capital Gains rates are the same (0%, 15%, and 20%); New law has breakpoints ($77,200 and $479,000).
- The Kiddie Tax has been modified. Taxable earned income is taxed at a single individual’s rate and the net unearned income is taxed at the trusts applicable rates. And the parents will no longer be allowed to elect to include the dependents unearned income on their own return.
- Distributions from 529 plans can be used to pay up to a total of $10,000 of tuition per beneficiary (regardless of the number of contributing plans) each year at an elementary or secondary (k-12) public, private or religious school of the beneficiary’s choosing.
- New Pass-Through Income Deduction: NOTE: The IRS released “Proposed Regs” on 8/8/18. This means that they published a draft of their explanation pending input from professionals for a period of 45 days before they modify or publish final guidelines. The Proposed Regs are 184 pages; however, the following is from an IRS e-news article.
“The deduction is generally available to eligible taxpayers whose 2018 taxable incomes fall below $315,000 for joint returns and $157,500 for other taxpayers. It’s generally equal to the lesser of 20 percent of their qualified business income plus 20 percent of their qualified real estate investment trust dividends and qualified publicly traded partnership income or 20 percent of taxable income minus net capital gains.
Deductions for taxpayers above the $157,500/$315,000 taxable income thresholds may be limited. Those limitations are fully described in the proposed regulations.
Qualified business income includes domestic income from a trade or business. Employee wages, capital gain, interest and dividend income are excluded.”
(Sources: irs.gov, RIA Checkpoint)
Further explanation and how these tax law changes are applicable to my clients are available by appointment.