Thursday, October 11, 2018

TCJA 2018 “quick facts”

TCJA 2018 “quick facts”
  • Seven tax brackets (mostly "3% lower" tax rates)
    • 10%
    • 12%
    • 22%
    • 24%
    • 32%
    • 35%
    • 37%
  • Standard deduction: 
    • MfJ      24,000
    • Single  12,000
    • HoH     18,000
  • In TY2017, 70% of taxpayers used the standard deduction
  • In TY2018, estimated 94% of taxpayers will use the standard deduction
  • Rev. Reg. §1.163-8T - interest tracing - HELOC interest NO longer deductible
  • Use form 8801 AMT credit from prior-year - carry forward to current year to take an AMT credit in current year, provided you have No AMT tax in the current year
  • There's No longer a Pease phase-out on itemized deductions. No limitation on income for itemized deductions for TY2018
  • C-Corp 21% tax rate on first dollar and last dollar. 
  • No QBI deduction for C-Corp’s because they already have the low flat 21% tax rate
  • 20% QBI deduction cannot exceed 20% of taxable income. 
    • use the correct SIC code. IRS is tracking SIC code for QBI purposes 
    • 20% deduction 
      • Not allowed in Computing AGI 
      • Does not reduce self-employment tax 
      • Is Allowed as a deduction reducing taxable income
  • Keep your business taxable income under $315,000 to get full QBI deduction
  • Because not all states adopted new federal law, there will be federal and state differences on medical expenses and other itemized deductions such as the SALT deduction
  • Gambling winnings/losses. 
    • Mileage to and from the casino is deductible as part of your gambling losses.
    • Losses cannot exceed winnings. 
    • Gamblers still have to itemize to deduct losses.
  • Vehicle depreciation 
    • 1st  year  10,000 
    • 2nd year  16,000 
    • 3rd year     9,600
    • Thereafter 5,760
    • Switch the straight-line depreciation in year straight-line exceeds accelerated depreciation
  • Capital gains tax
    • No significant changes
    • Rates don’t match brackets exactly
    • STCG still ordinary income
    • 15% LTCG rate starts at 38,600 for single. 77,200 for MfJ
    • 20% LTCG rate starts at 425,800 for single. 479,000 for MfJ
  • NOLs limited to 80% of Taxable Income
  • DPAD §199 (Domestic Production Activities Deduction) Repealed
  • Inventory - Businesses under $25 million gross receipts need NOT account for inventory under §471. May treat inventory as non-incidental Materials and Supplies
  • Marriage penalty eliminated for couples earning under $400K
  • §179
    • Is NOT depreciation
    • Expensed
    • Unadjusted Basis of Property equals ZERO
  • §1231 “Like-kind exchange” NOW only for Real Estate
  • New $500 credit for dependents 17 years or older
  • §529 now okay for tutoring grades K - 12 and private school
  • Mortgage interest - deduction on debt only up to $750K
  • SALT capped at $10K MFJ, $5K Single
  • Beginning 2019 Alimony NO longer deductible
    • Prior to 2019 alimony grandfathered
  • ACA
    • 3.8% NIIT (same)
    • 0.9% Medicare tax (same)
  • No more ACA penalty (for lack of health insurance) after TY2018
  • AMT exemption phaseout thresholds:
    • $1MM MfJ
    • $500K Single
  • Medical Expenses
    • 7.5% for TY2017 and TY2018 
    • 10%  for TY2019
Footnote:

  • Steve’s three accounting rules:
    • Never take too much depreciation
    • Bank transfers are never taxable
    • Federal Income Tax (FIT) is never deductible
  • Four types of Assets
    • Inventory
    • Capital 
    • Real Estate 
    • Depreciable (§1231, §1245, §1250)
Have a Blessed Day.

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