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Tax Reform. Was it good or bad? Yes.

Posted by Admin Posted on Jan 08 2018

 

New Tax Reform Law

 

These changes are effective for tax years beginning after December 31, 2017 (except where noted).  This is a brief overview.  Please call us if you have any questions.

 

Individuals

 

Good news:

·         Drops of individual income tax rates ranging from 0 to 4 percentage points (depending on the bracket) to 10%, 12%, 22%, 24%, 32%, 35% and 37% — through 2025

·         Near doubling of the standard deduction to $24,000 (married couples filing jointly), $18,000 (heads of households), and $12,000 (singles and married couples filing separately) — through 2025

  • Doubling of the child tax credit to $2,000 and other modifications intended to help more taxpayers benefit from the credit — through 2025
  • Reduction of the adjusted gross income (AGI) threshold for the medical expense deduction to 7.5% for regular and AMT purposes — for 2017 and 2018
  • Elimination of the AGI-based reduction of certain itemized deductions — through 2025
  • AMT exemption increase, to $109,400 for joint filers, $70,300 for singles and heads of households, and $54,700 for separate filers — through 2025
  • Elimination of the individual mandate under the Affordable Care Act requiring taxpayers not covered by a qualifying health plan to pay a penalty — effective for months beginning after December 31, 2018
  • Doubling of the gift and estate tax exemptions, to $10 million (expected to be $11.2 million for 2018 with inflation indexing) — through 2025

Bad News:

  • Elimination of personal exemptions — through 2025
  • New $10,000 limit on the deduction for state and local taxes (on a combined basis for property, income taxes, and sales taxes; $5,000 for separate filers) — through 2025
  • Elimination of the deduction for interest on home equity debt — through 2025
  • Elimination of miscellaneous itemized deductions subject to the 2% floor (such as certain investment expenses, professional fees and unreimbursed employee business expenses) — through 2025
  • Elimination of the moving expense deduction (with an exception for members of the military in certain circumstances) — through 2025

Businesses

 

Good News:

  • New 20% qualified business income deduction for owners of flow-through entities (such as partnerships, limited liability companies and S corporations) and sole proprietorships — through 2025
  • Doubling of bonus depreciation to 100% and expansion of qualified assets to include used assets — effective for assets acquired and placed in service after September 27, 2017, and before January 1, 2023
  • Doubling of the Section 179 expensing limit to $1 million and an increase of the expensing phaseout threshold to $2.5 million
  • Mostly lower C-corporation flat tax rate of 21%. (replaces C-corporation tax rates of 15%-35%) 

Bad News:

  • Elimination of the Section 199 deduction, also commonly referred to as the domestic production activities deduction or manufacturers’ deduction — effective for tax years beginning after December 31, 2017, for noncorporate taxpayers
  • New rule limiting like-kind exchanges to real property that is not held primarily for sale
  • New limitations on deductions for employee fringe benefits, such as entertainment and, in certain circumstances, meals and transportation