Tax Laws for 2018

Here are the highlights of the new Tax Laws taking effect 2018.  Some people will pay less due to the new tax law; others will pay more.  These are the major changes for personal tax returns starting in 2018.

Caution!  Most employers are now reducing tax withholding; you may owe more tax when filing for 2018!

Tax reductions:

(A) Lower tax rates.

(B) Significantly increased standard deduction.

(C) Increased Child Tax Credit to $2,000 per child under 17.

(D) $500 tax credit for dependents over 16.

(E) Greatly increased threshold ($400 k if MFJ) before Child Tax Credit is phased out.

(F) 20% deduction, subject to limits, for income from sole proprietorships, partnerships, S corps, and rentals.

Tax increases:

(A) Personal exemption allowance of $4,050 per person is eliminated.

(B) No deduction for unreimbursed employee job expenses, investment expenses, safe deposit box, and most tax preparation fees.  Some tax preparation fees may still be claimed on Schedules C & E.

(C) Home mortgage interest no longer deductible unless for purchase or improvement of home.  Deductions eliminated: home equity loan interest and cash-out refinance interest unless to improve the home; interest on the portion of home loans greater than $750,000 for home bought after 12/14/17.  These changes do not alter what can be claimed for the clergy housing allowance.

(D) The itemized deduction for state and local tax and property tax is limited to a total of $10,000.

(E) Moving expense no longer deductible, except for some military.

(F) Employer-paid moving expense is now taxable to you.

Special Situations:

(A) Casualty & Theft Losses are no longer deductible except in federally declared disaster areas.

(B) The penalty for not having health insurance is eliminated starting in 2019.  (C) For post-2018 divorces, alimony is not deductible by the payer nor taxable to the recipient.

(D) The amount that you can leave to your heirs without any estate tax has roughly doubled to $11.2 million ($22.4 million for married couples).  (E) Dependents with over $2,100 of investment income and/or taxable scholarship income may pay much more tax than before.

(F) You can no longer “undo” a conversion to Roth IRA.

(G) 529 Plan distributions can now be used for tuition at elementary or secondary public, private or religious schools, up to $10,000 per student.

Key Strategy:

Because employee un-reimbursed job expenses cannot be claimed on your 2018 tax return (except for ministers’ Social Security Tax calculations), have your employer reimburse all job expenses! Contact us or register for our “Setting Up an Accountable Plan” video for more help.