Tax reform has passed- what does it mean for you?

Dec 20 2017

The Tax Cuts and Jobs Act was passed by both the House and Senate on December 20, 2017.  Most provisions of the Act become effective January 1, 2018.  Here is a look at many (but not all) of the provisions of the bill that affect individuals.  

All these provisions are set to expire (and revert back to current law) in 2025, if Congress does not extend prior to 2025:

  • Expanding tax brackets and lowered tax rates means most most individuals will realize a lower effective tax rate. Click here to see the new brackets.

  • Standard deductions are increased significantly, Married Filing Jointly $24,000, Head of Household $18,000, and all others $12,000.

  • Personal exemptions are repealed.

  • Individuals are allowed to deduct 20% of "qualified business income" from a partnership, S Corporation, or sole proprietorships.  Limitations apply based on income level. "Qualified business income" does not include S corporation shareholder's reasonable compensation or guaranteed payments.  If you have an S-Corporation, it may make sense to revoke the election in 2018.

  • Child tax credit increases to $2,000 per qualifying child.  The maximum refundable amount increases to $1,400.

  • Home equity loan interest deduction is no longer allowed.

  • State and local (sales, income and property) taxes will be limited to $10,000 ($5,000 married filing separately).

  • Medical expense threshold is reduced to 7.5% for 2017 and 2018.

  • Charitable deduction is denied for payments made for college athletic event seating rights.

  • All miscellaneous itemized deductions subject to the 2% floor under the current law are no longer allowed.

  • Moving expense deductions are no longer allowed, except for active duty military personnel.

  • The estate and gift tax exemption amounts are doubled.

  • Affordable Care Act Individual mandate penalty is reduced to $0.

  • AMT exemption amounts are increased and phaseout thresholds are also increased.

  

Have questions? Contact us today to schedule a consultation.

©2017 SDC, LLC    www.sdcglobalcpa.com

This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult tax, legal and accounting advisors before engaging in any transaction.

 

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