Hold on for the ride, folks. It’s getting interesting. The most significant tax reform in more than 30 years is likely to be signed into law within the next couple of weeks. So before you cozy up to the fire to enjoy your holiday, here are a few things to consider:
- Prepay your 2018 property taxes, buy your vehicles, boats, etc. by December 31, 2017. The bill caps the SALT deduction at $10,000. Gasp! This won’t help much if you are an AMT victim, but if not, enjoy!
- Give your 2018 charitable contributions by December 31, 2017. A significant majority of filers will not itemize in 2018, since the standard deduction is doubled.
Get your adult kids off the dole. The new bill eliminates the personal exemption ($4,050 per dependent) but almost doubles the standard deduction. Non-child dependents will only get you a $500 temporary credit on your return. If they file on their own, they get a $12,000 standard deduction and a 10% tax bracket up to $9,525. And you get a cleaner house.
- The corporate tax rate plummets, yes plummets, to 21%! What? It can’t be…but it is. Wait. There’s more.
- Pass-through owners get a 20% income deduction. This. Makes. Me. Cry. Where have you been all my life? Tragically, phase-outs and caps kick in at $157,000 for individuals and $315,000 for married couples. #productivitypenalty #thereisahackforthat #passiveownershipisattractive
- The bill doubles the amount of money exempt from estate tax to $10.98M for individuals and $21.96M for married couples. Sweet!
- It allows a $500 credit for non-child dependents, including elderly parents. Yes, please!
- It doubles the child tax credit to $2,000 for children under 17 and raises the income threshold to $200,000 for individuals and $400,000 for married couples. “This is huge!”, as President Trump would say. #nowthatmykidsaregrown
- The health insurance mandate is repealed.
- The bill eliminates the itemized deduction for the interest on home equity loans and caps the amount of acquisition mortgage debt at $750,000 (or $375,000 for MFS).
- Deductions for moving expenses and most miscellaneous itemized expenses are eliminated.
- Starting in 2019, you will no longer be able to deduct alimony payments if they are required by a divorce agreement entered into after 12/31/18. Recipients of nondeductible payments won’t have to include them in taxable income. Bad news for the payor, a sweet ride for the payee.
- Without a PAYGO waiver, the bill will trigger a significant cut to Medicare.
- The Act leaves intact the 3.8% net investment income tax and the 0.9% additional Medicare tax. Seriously?
both enacted by Obamacare.
- Chained CPI will be used to measure inflation. Eeek! Here today, gone tomorrow. Oh well. At least we have today. Carpe diem!
Qualifications, rules and limits apply.
As with all deductions, consult your CPA to determine the qualifications, rules and limits that apply.
M.E. Sullivan is a cloud based professional services provider specializing in cloud accounting.