12/06/2018
๐ฑ ๐๐ฒ๐ ๐ง๐ฎ๐
๐๐ต๐ฎ๐ป๐ด๐ฒ๐ ๐ณ๐ผ๐ฟ ๐ฌ๐ผ๐๐ฟ ๐๐ป๐ฑ๐ถ๐๐ถ๐ฑ๐๐ฎ๐น ๐ง๐ฎ๐
๐ฒ๐ ๐ถ๐ป ๐ฎ๐ฌ๐ญ๐ด
๐๐ง ๐บ๐ฐ๐ถ ๐ฉ๐ข๐ท๐ฆ ๐ข๐ฏ๐บ ๐ฒ๐ถ๐ฆ๐ด๐ต๐ช๐ฐ๐ฏ๐ด ๐ฐ๐ฏ ๐ข๐ฏ๐บ ๐ฐ๐ง ๐ต๐ฉ๐ฆ๐ด๐ฆ ๐ค๐ฉ๐ข๐ฏ๐จ๐ฆ๐ด ๐ฑ๐ญ๐ฆ๐ข๐ด๐ฆ ๐ค๐ข๐ญ๐ญ ๐ถ๐ด ๐ข๐ต ๐ด๐ญ๐ฐ-๐ด๐ฏ๐ฐ-๐ฎ๐ฒ๐ต๐ฒ. ๐๐ง ๐ธ๐ฆ ๐ข๐ณ๐ฆ ๐ฏ๐ฐ๐ต ๐ต๐ฉ๐ฆ๐ณ๐ฆ ๐ญ๐ฆ๐ข๐ท๐ฆ ๐ถ๐ด ๐ข ๐ฎ๐ฆ๐ด๐ด๐ข๐จ๐ฆ ๐ข๐ฏ๐ฅ ๐ธ๐ฆ ๐ธ๐ช๐ญ๐ญ ๐จ๐ฆ๐ต ๐ฃ๐ข๐ค๐ฌ ๐ต๐ฐ ๐บ๐ฐ๐ถ.
Hereโs a rundown of five key changes that can affect you.
#๐ญ: ๐ฃ๐ฒ๐ฟ๐๐ผ๐ป๐ฎ๐น ๐ฎ๐ป๐ฑ ๐๐ฒ๐ฝ๐ฒ๐ป๐ฑ๐ฒ๐ป๐ฐ๐ ๐๐
๐ฒ๐บ๐ฝ๐๐ถ๐ผ๐ป๐ ๐๐น๐ถ๐บ๐ถ๐ป๐ฎ๐๐ฒ๐ฑ
Taxpayers have routinely claimed personal and dependency exemption deductions for themselves, their spouses and their dependentsโbut not this year. The Tax Cuts and Jobs Act effectively repeals the exemption deductions by reducing the exemption amount to zero.
#๐ฎ: ๐ฆ๐๐ฎ๐ป๐ฑ๐ฎ๐ฟ๐ฑ ๐๐ฒ๐ฑ๐๐ฐ๐๐ถ๐ผ๐ป๐ ๐๐ป๐ฐ๐ฟ๐ฒ๐ฎ๐๐ฒ๐ฑ
On the plus side of the ledger, the new law nearly doubles the standard deductions for every filing status. For 2018, the new law sets the standard deduction at:
โข $24,000 for married individuals filing joint returns and surviving spouses,
โข $18,000 for heads of households, and
โข $12,000 for single taxpayers as well as married individuals filing separately.
#๐ฏ: ๐๐๐ฒ๐บ๐ถ๐๐ฒ๐ฑ ๐๐ฒ๐ฑ๐๐ฐ๐๐ถ๐ผ๐ป ๐๐ต๐ฎ๐ป๐ด๐ฒ๐
The new law temporarily resets the medical expense deduction limitation from 10% to 7.5% of adjusted gross income for 2018, does away with deductions for personal casualty and theft losses other than disaster losses, increases the deduction limit for some charitable contributions, bars write-offs of 2% miscellaneous itemized deductions, and eliminates the overall limit on itemized deductions. There have been changes to the State and Local tax deductions and to the Mortgage interest deduction.
๐๐ฐ๐ธ๐ฆ๐ท๐ฆ๐ณ, ๐ต๐ธ๐ฐ ๐ฌ๐ฆ๐บ ๐ค๐ฉ๐ข๐ฏ๐จ๐ฆ๐ด ๐ต๐ฉ๐ข๐ต ๐ข๐ณ๐ฆ ๐ฎ๐ฐ๐ด๐ต ๐ญ๐ช๐ฌ๐ฆ๐ญ๐บ ๐ต๐ฐ ๐ข๐ง๐ง๐ฆ๐ค๐ต ๐บ๐ฐ๐ถ ๐ธ๐ฉ๐ฐ ๐ฉ๐ข๐ท๐ฆ ๐ค๐ญ๐ข๐ช๐ฎ๐ฆ๐ฅ ๐ช๐ต๐ฆ๐ฎ๐ช๐ป๐ฆ๐ฅ ๐ฅ๐ฆ๐ฅ๐ถ๐ค๐ต๐ช๐ฐ๐ฏ๐ด ๐ช๐ฏ ๐ฑ๐ณ๐ช๐ฐ๐ณ ๐บ๐ฆ๐ข๐ณ๐ด. ๐๐ต๐ข๐ต๐ฆ ๐ข๐ฏ๐ฅ ๐ญ๐ฐ๐ค๐ข๐ญ ๐ต๐ข๐น ๐ฅ๐ฆ๐ฅ๐ถ๐ค๐ต๐ช๐ฐ๐ฏ๐ด ๐ข๐ฏ๐ฅ ๐๐ฐ๐ณ๐ต๐จ๐ข๐จ๐ฆ ๐ช๐ฏ๐ต๐ฆ๐ณ๐ฆ๐ด๐ต ๐ฅ๐ฆ๐ฅ๐ถ๐ค๐ต๐ช๐ฐ๐ฏ๐ด.
The Tax Cuts and Jobs Act limits mortgage interest deduction to the interest on $750,000 ($375,000 for married individuals filing separately) of acquisition debt. The reduction in the dollar cap for acquisition debt does not apply to debt incurred on or before Dec. 15, 2017, or certain debt incurred pursuant to a binding contract entered into before that date.
The deduction for interest paid on home equity loans and lines of credit is eliminated, unless they are used to buy, build or substantially improve the home of the taxpayer who secures the loan.
#๐ฐ: ๐ก๐ฒ๐ ๐ง๐ฎ๐
๐ฅ๐ฎ๐๐ฒ๐
As we have seen, the changes to exemptions and deductions may decreaseโor even increaseโa clientโs taxable income for 2018. Exemptions and deductions do not tell the whole story, however. The new law also modifies the income tax rates and brackets for 2018.
Under prior law, an individual taxpayerโs taxable income was taxed at a graduated rate of 10%, 15%, 25%, 28%, 33%, 35% and 39.6%. The new law reduces the rates to 10%, 12%, 22%, 24%, 32%, 35% and 37%.
#๐ฑ: ๐๐ต๐ถ๐น๐ฑ ๐ง๐ฎ๐
๐๐ฟ๐ฒ๐ฑ๐ถ๐๐ ๐๐ป๐ฐ๐ฟ๐ฒ๐ฎ๐๐ฒ๐ฑ
For taxpayers with children or other dependents, one of the most significant provisions in the Tax Cuts and Jobs Act may be the changes to the child tax credit. As under prior law, taxpayers can claim a child tax credit for each qualifying child under age 17.
However, the new law doubles the amount of the credit from $1,000 to $2,000 per child. For higher-income taxpayers, the new law also significantly raises the income levels at which the otherwise allowable credit is phased out. Up to $1,400 of credit per child is refundable for 2018.
๐ก๐ฒ๐ ๐ฐ๐ฟ๐ฒ๐ฑ๐ถ๐ ๐ณ๐ผ๐ฟ ๐ผ๐๐ต๐ฒ๐ฟ ๐ฑ๐ฒ๐ฝ๐ฒ๐ป๐ฑ๐ฒ๐ป๐๐. The new law creates a new $500 nonrefundable tax credit for dependents who do not qualify for the regular child tax credit, including children under 17 who do not have an SSN. The new credit is treated as part of the regular child credit in determining the amount of the credit reduction for higher-income taxpayers.
