Tax Cuts and Jobs Act
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Tax Cuts and Jobs Act
The Tax Cuts and Jobs Act (The Act) has affected many taxpayers. The Act reduced tax rates for many taxpayers, and many businesses operated as pass-throughs may see their tax liability lowered. The IRS has designed a new 2018 Form W-4 (Employee’s Withholding Allowance Certificate) to reflect employees’ tax savings on their net paychecks. Here is a synopsis of the major highlights of the Act:
Individuals will itemize deduction of up to $10,000 ($5,000 for married filing separately) for the total of (i) state & local property taxes; and (ii) state & local income taxes. The deduction on home equity interest is suspended, and the deduction on mortgage interest is limited to underlying $750,000 debt.
The itemized deduction for charitable donations won’t be cut, but because many itemized deductions are repealed in exchange for a larger standard deduction, donations may not benefit many taxpayers because they won’t itemize deductions any more. The alternative minimum tax (AMT) exemption amount has increased. Like-kind exchanges are limited to real property only. Personal exemptions are repealed.
For many years, businesses have deducted 50% of their business entertainment expenses. No deduction is allowed for such expenses any more. No more deduction for moving expenses (except for the Armed Forces), no tax-free reimbursement of employment-related moving expenses, and no deduction for employees’ un-reimbursed expenses, among other things.
There is a new “20% Business Income” deduction for most pass-throughs. The old 50% special first-year depreciation increased to 100%, and the $500K Section 179 depreciation expense increased to $1 Million, respectively.
The annual gift exemption increased from $14K per person per year to $15K, and life-time gift and estate tax threshold of $5,490,000 changed to $11,180,000 per person.
Unless the law becomes permanent, the above changes will revert to 2017 amounts as indexed, on January 1, 2026.
The highest C corporation tax rate is reduced from 35% to 21%, and the corporate AMT is repealed permanently.
According to the Congressional Budget Office, the Act will add $1.4467 trillion to the national debt.
Click below to review specific affected section for 2018:
3. Individual Tax Rates and Brackets
6. Kiddie Tax
9. Mortgage and Equity Interest
10. Medical Expenses
12. College and Athletic Seating Rights
14. Miscellaneous Itemized Deductions
15. Limitation on Itemized Deductions
16. Qualified Bicycle Commuting Exclusion
17. Moving Expenses
18. Obama Individual Mandate Repealed
19. Alternative Minimum Tax (AMT)
21. Disaster Relief Provisions
23. New 20% Deduction for Pass-Throughs
24. Luxury Autos
26. Qualified Improvement Property
30. Corporate AMT
31. Taxation of Americans Living Abroad
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