Congress has recently passed new tax legislation and here are some highlights that may affect you. Most of the filing for 2017 taxes will remain the same except for the few items listed below if applicable to your situation.
Effective 1/1/18 unless otherwise noted below: (so this will be for filing the 2018 tax returns in 2019)
Tax years 2017 and 2018 medical deductions will be limited to amounts above 7.5% of adjusted gross income (AGI) (down from 10%.)
After 12/31/18, there will be no more penalty for not having health care.
No charitable deduction is allowed to a higher education institution in exchange for purchasing seating or tickets to an athletic event (includes college football).
Miscellaneous itemized deductions will no longer be available (Schedule A). This includes items such as: tax preparation fees, investment fees, safety deposit box rental and unreimbursed employee expenses (your out of pocket tools, uniforms, mileage, etc. when you have an employer).
Also, on the Schedule A, state and local income taxes are limited to $5,000 for Single and $10,000 for married filing joint which includes paid in taxes and real estate taxes total.
Interest on home equity lines used for any other purpose then to improve or build on your home will not be deductible.
Alimony will no longer be deductible or included in income for agreements coming into effect after 12/31/18.
Moving expenses are no longer deductible unless in the Armed Forces.
Personal casualty losses are no longer deductible unless a federally declared disaster.
Standard deductions had major increases: Single up to $12,000; Married filing joint $24,000 and Head of Household to $18,000. However, the personal exemptions have been removed (this is the dependency exemption for each person in your family that is claimed on your tax return, was $4,050 allowed for each person).
Child credit is increased to $2,000 per qualifying child (income phase out limits apply).
Individual tax rates have lowered for each income group and you will see a change in your withholdings. (10, 12, 22,24,32,35, 37% are the new rates).
Business clients: effective 1/1/18 unless otherwise noted
100% Bonus depreciation has been passed for purchases after 9/27/2017.
For C corporations – there is a flat corporate tax rate of 21%.
Meals provided for those staff meetings or to your staff for planning or training are no longer 100% deductible, but falls under the 50% deductibility as the other meals were with proper documentation. Entertainment will no longer be deductible at all for your clients, these includes dues.
Domestic Production Credit is no longer available. (manufacturers)
Net Operating Losses are only able to be carried forward and limited up to 80% of Income. (no longer NOL carry back allowed).
Business interest expenses are limited to 30% of the adjusted taxable income of the taxpayer for the taxable year.
Cash method is available to taxpayers under $25 million in gross receipts within applicable rules.
These are the highlighted items I believe will affect the majority of my clients. There are many more changes within this passed legislation and I will apply and communicate to you as I see it may affect you. If you need to discuss anything for the upcoming year and plan accordingly we can set up a time to discuss.
Every taxpayer will be affected by the tax rate changes, standard or itemized and personal exemption changes. The rest will be determined on a case by case basis.
I look forward to hearing from you. I am accepting new clients and any new referrals will get a 10% discount on your current tax preparation fees.