Here are some helpful hints on the Tax Cuts and Job Act.
Some examples that will affect the majority of tax payers:
Standard Deduction Increases
No matter your filing status, the standard deduction increases in 2018.
- Single and Married Filing Separately: $12,000
- Married Filing Jointly: $24,000
- Head of Household: $18,000
Personal Exemption Eliminated
Under the tax reform, taxpayers can no longer claim the $4,050 personal exemption for each of their dependents.
Child Tax Credit Rises
The Child Tax Credit Increases in value from $1,000 to $2,000. The tax reform bill also introduces a new $500 credit for non-child dependents.
State and Local Capped
Taxpayers can deduct up to $10,000 in state and local income taxes: sales tax and property tax combined. Previously there was no cap.
ACA Individual Mandate Repealed
Beginning in 2019, individuals who choose to go with healthcare coverage for the year will not have to pay tax penalties.
Mortgage Interest Deduction Drops
Individuals who purchase a home in 2018 can only deduct interest up to $750,000 in mortgage debt (previously $1 million). The interest deduction on home-equity loans is eliminated.
Form 2106 Employee Business Expenses
Beginning 2018 this form has been eliminated, with the exception of qualified performing Artists, fee basis State or Local government officials, employees with impairment related work expenses or Armed Forces reservists.
Big Tax Law Changes That Will Impact Business Owners in 2018
Some Pass-Through Businesses Get A Big Deduction
Pass-through businesses are entities like S Corporation, Partnerships and Sole proprietorships whose profits pass through to the business owners, who then pay ordinary income tax on their personal returns. If you’re a pass-through business owner, good news is you may be able to deduct up to 20 percent of your qualified business income (the net income that comes directly from your business). The bad news ? You can only take it if you meet certain qualifications.
Some Business Deductions are Gone or Harder to Take
Starting in 2018, some key deductions that businesses have relied on are either going away or getting stricter requirements.
- Entertainment expenses. The 2017 TCJA eliminated the deduction for any expenses related to activities generally considered entertainment, amusement or recreation. Food and Beverages that are provided during entertainment events will not be considered entertainment if purchased separately from the event and therefore will be 50% deductible. Those courtside tickets for clients on the company dime used to be 50 percent deductible, but no more-entertaining clients is no longer considered a deductible expense. (Good news: Office holiday parties are still 100 percent deductible).
- Business Interest. Previously, any interest a business paid on business loan was generally deductible. Now, a business can only write off interest expenses that are equal to 30 percent of its adjusted taxable income. The rules around this can be complicated.
- Net Operating Loss (NOL) Deduction. In the past, if a business recorded a loss, it had the option to use those losses to either reduce any taxes paid in the past two tax years, or to reduce any future taxable income for the next 20 years. Under the new tax law, that NOL can only be carried forward, and is limited to 80 percent in any given year.
IRS – Despite the government shutdown, the Internal Revenue Service confirmed that it will process tax returns beginning January 28, 2019 and provide refunds to taxpayers as scheduled.