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• DPAD §199 (Domestic Production Activities Deduction) Repealed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.

Alternative Minimum Tax Adjustments

Alternative Minimum Tax Adjustments
Under regular tax, deductions subtracted from AGI reducing  taxable income, lower the amount of tax, but under AMT specific deductions are not permitted.

Below is a list of deductions allowed under regular tax, but not permitted for AMT:
• Standard deduction (for non-Schedule A filers).
• Personal exemption(s)
• Property tax
• State & local income tax
• General sales tax
• Personal excise tax
• Investment advisory fees
• Employee business expenses (Form 2106) itemized on Schedule A

While regular tax allows a deduction for mortgage interest on acquisition indebtedness and home equity indebtedness, AMT allows a deduction only on acquisition indebtedness.

Under AMT, medical & dental expenses are deductible when your expenses are more than 10% of AGI -- 7.5% of AGI for taxpayers 65 years or older. 

Charitable donations ARE allowed under the AMT as an itemized deduction.

Lower tax rates that apply to qualified dividends & long-term capital gains for regular tax purposes apply for AMT purposes as well.

Most people's goal to reduce total tax, (the sum of regular tax plus AMT), is spoiled when deductions reducing regular tax are added back for AMT, increasing AMT. A plan to reduce or eliminate AMT, by decreasing deductions will cause regular tax to increase, resulting in a "no-win" situation—AMT goes down, but regular tax goes up,"Catch-22"

Sadly, there is little taxpayers can do to reduce their AMT exposure.