Now that the GOP tax reform bill has been signed into law, it’s time to take a look at how the new changes to the tax code, also known as the “Tax Cuts and Jobs Act,” may impact individuals and businesses.
Below is a summary of the changes that may impact you:
Changes Affecting Individual Taxpayers
1. Individuals will see these changes to tax rates/brackets:
2. There are also new capital gains income tax brackets:
3. There is an increased standard deduction of $12,000 for single filers and $24,000 for joint filers.
4. The personal exemption is eliminated.
5. The Child Tax Credit increases to $2,000 per child.
6. The Obamacare individual mandate penalty tax is eliminated after 2019.
7. 529 education savings accounts can now be used to save for elementary, secondary and higher education costs.
8. There are several changes to itemized deductions including:
9. The following applies to any divorce or separation agreement executed after December 31, 2018:
10. Changes to deductions from certain pass-through income are as follows:
11. The Alternative Minimum Tax exemption threshold amounts are:
Tax Changes Affecting Businesses
1. The corporate tax rate is lowered to 21% beginning in 2018.
2. The special tax rate for personal service corporations is eliminated, effective for tax years beginning after 2017.
3. The corporate Alternative Minimum Tax is repealed for tax years beginning after December 31, 2017.
4. Companies will be allowed to immediately write off the full cost of new equipment.
5. An increase in Code 179 small business expensing under the Act includes an increase of the limitation of expense amounts to $1 million and an increase to the phase-out amount to $2.5 million—effective for tax years beginning after 2017.
6. Small businesses can still write off interest on loans.
7. The Domestic Production Activities deduction is repealed. Taxpayers will be able to deduct a net operating loss carryover only to the extent of 80% of the taxpayer’s taxable income.
8. The act repeals all carrybacks, but provides a special two-year carryback for small businesses and farms in the case of certain casualty and disaster losses.
9. The Like Kind Exchange provisions have been reformed:
10. Changes to deductions for entertainment and other expenses, effective for amounts paid or incurred after 2017:
As you can see, the Tax Cuts and Jobs Act includes some significant changes to the tax code that are likely to affect many taxpayers and businesses. If you have questions in regard to how they will impact your own tax situation, please contact us—we’re here to help!
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