The TCJA was signed into law at the end of 2017, and the IRS has been working throughout 2018 on this major piece of tax legislation, issuing proposed regulations, notices, memos, FAQs and more.
We want to help you navigate all these changes, and when possible, take advantage of them. Our focus is to help you pay the least amount of tax possible while staying out of trouble with the government.
Below is a summary of important developments you should be aware of:
The standard deduction increased in 2018 for all filers. Due to the increase in the standard deduction and reduced usage of itemized deductions, you may want to consider filing a new Form W-4 so that your withholding is reflective of your actual tax liability under these new rules.
There’s a new deduction available for individuals and trusts that have qualified business income from a partnership, S corporation or sole proprietorship. This is effective for tax years 2018 through 2025.
The new tax law increases the child tax credit to $2,000 per qualifying child. The phase-out threshold begins at $400,000 for married taxpayers filing a joint return and $200,000 for other taxpayers. The maximum additional child tax credit increased to $1,400.
For mortgages that originated in 2018, the interest deduction is limited to interest on debt up to $750,000 ($375,000 for married taxpayers filing separately). Also, interest on home equity loans is only deductible if the funds are used for home improvements or traced to business, investment or passive activity expenditures.
529 plans now allow for up to $10,000 in annual distributions for tuition at public, private, or religious elementary and secondary schools.
There is now an overall limit of $10,000 for property taxes and state and local income taxes (or sales tax in lieu of income taxes). This provision applies from Jan. 1, 2018, to Dec. 31, 2025.
We’re here to help you navigate the changes and ensure you receive the most favorable tax treatment.
The Alternative Minimum Tax (AMT) remains a concern.
The new law repealed the AMT for corporate taxpayers, but it still applies to individuals. Many taxpayers are required to add back certain non-taxable income and deductions they’ve taken. You’re now allowed a larger exemption that somewhat reduces the AMT’s effects. That exemption rose in 2018 to $70,300 for single and head of household taxpayers and to $109,400 for married couples filing jointly. Talk to us about other ways to minimize your exposure to the AMT using techniques such as income acceleration or deferral.
Tax identity theft is a significant threat.
Our firm takes security very seriously, so we want to begin with a reminder that tax identity theft is a growing problem. With fraudsters becoming more sophisticated and large breaches happening so frequently — such as the 2017 Equifax incident which affected 143 million American consumers — tax identity theft remains a concern. Unfortunately, it can take many forms, so If you receive any suspicious communications from the IRS, you can report the contact by filling out this IRS Impersonation Scam Reporting Form or calling (800) 366-4484. We also urge you to contact our office for advice whenever you receive a communication from the IRS or believe you might be an identity theft victim.
The Affordable Care Act (ACA) and your taxes.
The TCJA repealed the shared responsibility payment (the penalty that the ACA imposes on individuals do not have health insurance) beginning in 2019. However, other aspects of the Affordable Care Act are still in place.
Be sure your retirement planning is up to date.
We recommend you review your retirement situation at least annually and make revisions and adjustments as needed. That includes making the most of tax-advantaged retirement saving options. For example, if you’re eligible, there’s still time to contribute to a traditional or Roth IRA; you may even be able to deduct your contribution to a traditional IRA. If your employer has a 401(k) plan, there’s still time to maximize your contributions and achieve significant tax savings. Participants age 50 or older can make catch-up contributions, thereby further increasing potential tax savings.
Please contact our office if you have any questions regarding the new tax law changes.