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PLANNING FOR 2018

1/18/2018

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​The Tax Cut and Jobs Act is the biggest tax reform law in over 30 years. When you file your 2018 tax returns — about a year from now — your tax return will look very different. And because most changes don’t happen until then, there's time to learn about the changes and plan for next year. Here are a few of the biggest changes that may affect you.

Tax rate changes. Both individual and corporate rates have changed. The maximum individual rate is reduced to 37% and the corporate rate is now a flat 21%. Because each taxpayer's situation is unique, whether the rate changes help or hurt can't be determined without looking at the individual situation.

Standard deduction increases but personal exemptions eliminated.  Again - each taxpayer's situation is unique and whether these changes help or hurt can't be determined without looking at the individual situation.

Increased Child Tax Credit and new Dependent Credit: The credit is increased for each child to $2,000 (up to $1,400 of which is refundable for each child) and each non-child dependent can now receive a new credit of $500. The phaseout thresholds for these credits are drastically increased. Married taxpayers filing a joint return can claim the full credits if their adjusted gross income is $400,000 or less ($200,000 for all others). The credits are fully phased out for married taxpayers filing a joint return when their adjusted gross income reaches $440,000 ($240,000 for all others). This means that many more taxpayers will be able to claim these credits in 2018 and beyond.

Disappearing deductions: Beginning with the 2018 tax year, you will no longer be able to deduct:
  • State income tax and property taxes above $10,000 per year in total;
  • Moving expenses (with an exception for certain military);
  • Employee business expenses such as mileage, travel, entertainment, home office expenses, union dues, tax preparation fees, and investment fees, among others;
  • Mortgage interest beyond interest on $750,000 of acquisition debt, if you purchase a new home; and
  • Mortgage interest paid on equity debt (this is no longer deductible for any taxpayers).

Some new benefits for individuals:
These new benefits include:
  • The medical expense AGI threshold will temporarily drop to 7.5% of AGI for 2017 and 2018;
  • The AMT threshold is increased, so fewer middle-income taxpayers will be subject to AMT;
  • The estate tax exclusion has nearly doubled, to $10 million (adjusted for inflation); and
  • The annual gift tax exclusion remains the same ($14,000 for 2017 and $15,000 for 2018), but the maximum rate on gifts is 35%.

Small business benefit:
Beginning in 2018, there will be up to a 20% deduction from net business income for a sole proprietorship, LLC (excluding those taxed as a C corporation), partnership, S corporation, and rental activity. The rules are incredibly complex but there is a lot of planning that we can do to maximize this deduction for you.


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    Federal and state tax laws and regulations change regularly.  As we become aware of changes, we will post them here and, if you are a client who has provided us with an email address, we will also email them to you.

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