2018 TAX CUTS AND JOB
ACT (TCJA)
INDIVIDUALS
TCJA will lower tax rates (top rate reduced from
39.6% to 37%) at many levels but impact to individuals/families will depend on
a variety of other changes made by the Act
- Most provisions begin 1/1/2018 and end
12/31/2025
- Increase in Standard Deductions to $24,000 for
joint filers, $18,000 for Head of Households, and $12,000 for Single and Married
Filing Separately
- Loss of Personal and Dependency exemptions
Change in Itemized Deductions:
- State and Local Taxes - $10,000 limit on
aggregate property, state and local taxes as an itemized deduction
- Medical Expenses
- will revert back to the 7.5% AGI reduction for 2017 and 2018 and then
10% for 2019 and forward
- Interest you pay – Home Equity Loan Interest no
longer deductible
- Charitable Contributions – Total Cash
contributions deductible up to 60% AGI. No deductions for seating rights for
college sporting events
- Casualty and Theft Losses – deductible only if
due to federally declared disaster
- Employee Reimbursed Job Expenses and
Miscellaneous Deductions will no longer be deductible including safe deposit
boxes, tax preparation fees, investment fees, gambling losses
Moving Expenses – no deduction except for
certain military personnel
Alimony – for post 2018 divorce degrees and
separation agreements, alimony will not be deductible by the paying spouse and
will not be taxable to the receiving spouse.
529 Plans – may now be used for educational
expenses at an elementary or secondary public, private or religious school
Kiddie Tax – unearned income of a child now
taxed at the capital gains and ordinary tax rates for trusts and estates
Child and Family Tax Credit – Credit increased
to $2000 for qualifying children under 17 and refundable portion of credit to
$1400. New $500 credit for dependents who are not qualifying children. Credits
now phased out at $400,000 for joint filers.
Health Care “Individual Mandate” – Beginning
2019, there is no longer a penalty for individuals who fail to obtain minimum
essential health coverage. There is no change to the large employer mandate to
provide insurance
BUSINESSES
Tax Rates for C Corporations – beginning 2018
tax year – 21% flat tax rate and eliminates the corporate AMT
New 20% Deduction for Qualified Business Income
from a Pass-through entity such as Partnership, S Corporation or Sole
Proprietorship
- reduces taxable income but not adjusted gross
income and will phase out for income from certain services
- For taxpayers with income above $315,000 joint
and $157,500 single, limitation on W-2 wages and value of depreciable fixed
assets is phased in
- deduction phased out for income from certain
service related businesses
Deduction is not available to:
- businesses which provide services in the fields
of accounting, actuarial science, athletics, brokerage services, investing,
consulting, financial services, health, law or the performing arts or whose
principal asset is the reputation or skill of one or more of its employees or
owner
Bonus Depreciation – Property placed in service
after 9/27/17, 100% deduction –
- New or used property
- 100% begins decreasing inn year 2023 to 80% and
down to 0% by 2027
Section 179 Expensing – increased to $1 Million
in 2018 and expands the definition of qualified property
Health Care Coverage for Employees - There is no
change to the large employer mandate to provide insurance
Entertainment Expense and Club Dues:
- No deduction is allowable with an activity generally
considered entertainment, amusement or recreation
- No deduction for membership in clubs organized
for business, pleasure, recreation or other social purpose
Net Operating Losses – beginning 2018, carryback
provision is eliminated and NOLs can be carried forward indefinitely
Like Kind Exchanges – will limit tax-free
exchanges to exchange of real property that is not held primarily for sale,
thus, personal property like autos and intangible property cannot qualify for
tax-free like kind exchanges.
Withholding on Employee Wages – because of new
tax rates for 2018, tax withholding tables will change. IRS indicates it will
release these tables in January for employers to begin using in February 2018
ESTATES
Tax exemptions for estates doubled to $10
million per person beginning 1/1/2018 and indexing to approximately $11.2
million by 2018
Marilyn
L. Miller, CPA
123
W. Washington Ave.
Athens, TN 37303
(423)745-6680
Jason G. McPhail, CPA
345
Frazier Avenue, Suite 207
Chattanooga, TN 37405
(423)756-7002
