New Tax Rates and Brackets Beginning after December 31, 2017 and before January 1, 2026
• 7 Brackets apply to individuals – 10%, 12%, 22%, 24%, 32%, 35% and 37%
• Pre-TCJA law 6 brackets – 10%, 15%, 25%, 28%, 33%, 35%, and 39.6%
Standard Deduction Doubles
• Single = $12,000 (2017 amount is $6,500)
• Joint = $24,000 (2017 amount is $12,000)
• Elderly and Blind keep additional standard deduction amount
• Personal Exemptions are limited
New Measure of Inflation
• Use of the chained CPI-U rather than the CPI-U. This provision is considered permanent.
New QBI Deduction for pass-through net income from qualified S-Corps, LLC’s and sole proprietors.
• 20% deduction, subject to limitations such as the type of business (service, manufacturing, etc.) net income, W2 wages, and other factors.
TCJA Individual Deductions and Credits
• New Limits on Net Operating Losses (NOL)
• Non-corporate taxpayer losses disallowed but can be carried forward
• Deduction for Personal Casualty & Theft Losses Suspended
• Gambling Loss Limitation Modified – all deductions are limited to gambling income
• Child Tax Credit Increased
• State and Local Tax Deduction limited
• Mortgage & Home Equity Indebtedness Interest Deduction Limited
• Charitable Contribution Deduction Limitation Increased from 50% to 60%
• CWA (contemporaneous written acknowledgement) required for ALL contributions – no minimum
• No Deduction for amounts paid for college Athletic Seating Rights
• No Alimony Deduction
• No Miscellaneous Itemized Deductions subject to 2%
• No Qualified Bicycle Commuting Exclusion
• No Exclusion for Moving Expense Reimbursements
• No Moving Expense Deduction
• No Deduction for Living Expenses of Members of Congress
• Medical Expense Deduction Threshold reduced from 10% to 7.5%
• Repeal of Obamacare Individual Mandate
• Alternative Minimum Tax (AMT) – Exemption amounts increase and subject to phase out at higher income levels
TCJA Business Highlights
• 1 Corporate Tax rate 21%
• Vs. Current tax rates
• 15% taxable income up to $50k
• 25% taxable income over $50k up to $75k
• 34% taxable income over $75k to $10mil
• 35% of taxable income over $10mil
• No Corporate Alternative Minimum Tax
• Pass-through entities deduction discussed above
• Net Operating Losses (NOL) limited to 80%
• Carryback eliminated in most cases/Carryforward indefinitely
TCJA Depreciation and Expense Deductions
• Section 179 deduction doubles
• Bonus Depreciation doubles and now available for new and used equipment
• Luxury auto depreciation deduction increased
• Business-related entertainment deductions eliminated except 50% cost of qualified meals
• Qualified Domestic Production Deduction eliminated
• Business interest expenses capped at 30% for businesses with average gross receipts of more than $15mil
• Foreign taxes – Complex new system implemented
TCJA Miscellaneous Changes
• Repeal of rules allowing re-characterization of IRA contributions
• Changes to Length of Service Award Programs for Public Safety Volunteers
• Extended Rollover Period for Rollover of Plan Loan Offset Amounts
• New limits on executive compensation
• New restrictions on like-kind exchanges
• No Lobbying Costs
• New credit for paid family and medical leave
• Modification for capital contribution exclusion
• Additional repeal modification of certain partnership rules
• Treatment of S corporation conversion to C corporation
TCJA Tax-Exempt Corporations
• Restrictions on Executive Compensation
• New excise taxes
• Changes to unrelated business taxable income (UBTI)
DISCLAIMER
This information is intended to provide an overview of the major changes to the tax code from the passing of the TCJA. Every taxpayer’s situation is different and consultation with a professional is advised before taking any action based on the information contained in this newsletter. I strongly encourage my clients to plan to discuss these changes with me and the potential impact the changes will have going forward. Donya S. Oneto, CPA and BITS, Inc. are not responsible for any tax liability, penalties or interest resulting from information provided in this newsletter.
