Tax Cuts and Jobs Act

Disclaimer: The following is intended for general information only and not legal or tax advice.

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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The itemized deduction for charitable donations won’t be cut, but because many itemized deductions are repealed in exchange for a larger standard deduction, donations may not benefit many taxpayers because they won’t itemize deductions any more.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 Personal exemptions are repealed.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The highest C corporation tax rate is reduced from 35% to 21%, and the corporate AMT is repealed permanently.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:

1. Standard Deduction

2. Personal Exemption

3. Individual Tax Rates and Brackets

4. Capital Gains

5. Inflation Adjustment

6. Kiddie Tax

7. Carried Interest

8. State and Local Taxes

9. Mortgage and Equity Interest

10. Medical Expenses

11. Charitable Donations

12. College and Athletic Seating Rights

13. Alimony

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)

20. Education Expenses

21. Disaster Relief Provisions

22. Estate and Gift Tax

23. New 20% Deduction for Pass-Throughs

24. Luxury Autos

25. SUVs/Transportation

26. Qualified Improvement Property

27. Section 179 Depreciation

28. Bonus Depreciation

29. Corporate Tax Rate

30. Corporate AMT

31. Taxation of Americans Living Abroad

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Zaher Fallahi, LA and OC Tax Attorney/CPA, licensed in California and Washington D.C., with emphasis on Tax ( including cryptos) , Business and Estate Planning.

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