Tax Cuts and Jobs Act Changes
Tax time is upon us and we wanted to make sure our clients understand some of the Tax Cuts and Jobs Act changes that may impact them and their business:
- New marginal tax rates
- Higher standard deduction: The Tax Cuts and Jobs Act nearly doubled the standard deduction from prior levels. Filers can choose between using the standard deduction or itemized deductions
- The Child Tax Credit has doubled
- The Estate Tax under the new law doubled the threshold to $11.18 million for 2018 and will increase again in 2019
- The new pass-through income deduction. The Tax Cuts and Jobs Act includes a 20% deduction for “pass-through” income for small business owners.
- No more Obamacare penalties
- The State and Local Tax (SALT) deduction SALT deduction is limited to a total of $10,000 starting in 2018 tax year
- The Tax Cuts and Jobs Act lowered the threshold for medical expense deductions in the 2018 tax year to 7.5% of AGI from the prior threshold of 10%
- Charitable contributions are higher — filers can now deduct donations of as much as 60% of their AGI — up from the previous 50% maximum
- Mortgage interest is still deductible – the limit on the total deduction allowed has been reduced to the interest on up to $750,000 of qualified residence debt, or mortgage principal on a primary or secondary home. This is down from the previous limit of $1 million. Mortgages before December 15, 2017, are grandfathered into the higher limit
- Expanded use of 529 plans – a new change allows the use of 529 plan funds for qualifying educational expenses at any level, not just for college
Tax deductions that are gone:
- Moving expenses — except for certain moves related to active-duty military service.
- Casualty and theft losses — the deduction can now only be used for losses attributed to a federally declared disaster
- The “miscellaneous deduction” category
- Investment fees and tax preparation fee deduction
- Personal Exemption of $4,050
These tax deductions and credits were not affected:
- Capital gains and qualified dividend taxes
- The Child and Dependent Care Credit
- The American Opportunity Credit
- The Lifetime Learning Credit
- The Student Loan Interest Deduction
- Tax deductions for retirement savings
Have more questions about the current tax law? Need a CPA or accountant referral (we know plenty!)? Give us a call at 760.607.0611 or email us at [email protected] and we’d be happy to help!
The material contained herein is for informational purposes only and does not constitute tax nor legal advice. Investors should consult with their own tax advisor or attorney with regard to their personal situation.