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• DPAD §199 (Domestic Production Activities Deduction) Repealed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

Proposed Tax Plan from President-Elect Trump

Proposed Tax Plan from President-Elect Trump

• Tax brackets reduced to three: 12%, 25% and 33%.
• Elimination of:
• Alternative Minimum Tax
• Head of Household filing status
• Net Investment Income Tax
• Personal Exemptions
• Estate Tax

• Business tax rate lowered to 15%.
• Cap on itemized deductions at $100,000 for single filers and $200,000 for married filing joint. 
• Standard deduction $15,000 for single filers and $30,000 for married filing joint. 
• Low-income families get a credit up to $1,200 a year for child-care costs. 
• Close the "carried interest" exemption. Essentially, it allows big money managers to count earnings as capital gains instead of ordinary income. 
• Carried interest would be taxed at ordinary tax rates instead of capital gains rates.

2012 - 2013 Key Tax Facts

2012 - 2013 Key Tax Facts
New taxes for top earners
The year 2013 will have several new wrinkles for individuals with incomes above $200,000 for single or $250,000 for couples; specifically, higher Medicare payroll taxes and the new Medicare surtax on net investment income.  People with MAGI greater than $200,000 for single or $250,000 for couples, may be impacted by a new Medicare surtax (3.8%) on net investment income. Taxpayers with earned income above $200,000 for single or $250,000 for couples, will pay a higher Medicare payroll tax (0.9%).

Year	2012	2013
Top marginal long-term capital gains and qualified dividend rate	15%	23.8%*
Top marginal ordinary income tax rate	35%	39.6%
Top rate on short-term capital gains and non-qualified dividends	35%	43.4%*
Personal exemption phaseout (PEP). (MAGI above $250,000 for single or $300,000 for married couple filing jointly)	None	Completely eliminates value of personal exemption for single earners with an AGI over $372,501 and couples filing jointly with an AGI greater than $422,501.
Pease itemized deduction phaseout.	None	All itemized deductions reduced by 3% of MAGI over $300,000 for married couples filing jointly ($250,000 for single filers)  to a maximum reduction of 80% in value.
*includes 3.8% Medicare surtax

Taxable income above $400,000 or $450,000 for couples
In addition to the higher taxes described in the table below, upper-income Americans may be subject to a new 39.6% marginal rate on taxable income over $400,000 for single or $450,000 for married couples filing jointly. Taxpayers may be subject to tax on capital gains and qualified dividends at a rate as high 20% to 23.8% if the Medicare surtax on net investment income applies. 

Source:  A taxpayer's guide to 2013
"The 2013 tax changes you can expect, and what you can do about them."
FIDELITY VIEWPOINTS – 02/27/2013