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INDIVIDUALSGood NewsThe tax rates have been reduced for everyone and some of the tax brackets for married couples have been expanded to eliminate the “marriage penalty” that existed previously. See the tax rate schedule attached to this letter.The “standard deduction” that is used by individuals not “itemizing” their deductions has been nearly doubled. The 2018 standard deduction for married couples will be $24,000 ($12,700 for 2017), the deduction for those qualifying as “head of household” will be $18,000 ($9,350 for 2017), and the deduction for single tax payers will be $12,000 ($6,350 for 2017). There will still be additional amounts for taxpayers age 65 and older ($1,300 for married taxpayers and $1,600 for single taxpayers). The phase out rules based upon adjusted gross income have been eliminated.The child tax credit for dependents under the age of 17 will increase from $1,000 per child to $2,000 per child. The refundable portion (excess of the credits above the total income tax) will be $1,400 per child for many taxpayers. The threshold for phasing out this credit has been increased from $110,000 to $400,000 for married couples and from $75,000 to $200,000 for single taxpayers. Many more families will be able to take advantage of this tax credit.The “alternative minimum tax” formula has been enhanced. The deduction allowed has been increased from $78,750 to $109,400 for married couples and from $50,600 to $70,300 single taxpayers. The threshold for phasing out the deduction has been increased from $150,000 to $1,000,000 for married couples and from $75,000 to $500,000 for single taxpayers. Couple these changes with some of the other changes in “itemized deductions” that are no longer allowed and there will be significantly less taxpayers affected by this tax calculation in the future.The “Shared Responsibility Payment” (generally referred to as the penalty for not having a minimum level of health coverage) has been removed for years after 2018.The general limit on the amount of charitable contributions that are deductible in a tax year has been increased from 50% of “adjusted gross income” to 60% of “adjusted gross income” for cash (checks) paid to 501(c) organizations.The “itemized deduction” phase out for medical expenses will be 7.5% of adjusted gross income for all taxpayers for 2017 & 2018 and will rise to 10% thereafter.“Itemized deductions” for gambling losses can now include expenses such as travel (still limited to winnings).The Gift & Estate deduction for individuals will increase from $5,490,000 in 2017 to $11,200,000 in 2018.Qualified dividends will continue to be treated the same as long-term capital gains and thus receive favorable tax treatment. INDIVIDUALSBad NewsIndividuals will no longer be allowed to “recharacterize” rollovers from Traditional IRA’s to Roth IRA’s.The deduction for personal exemptions (taxpayers and their dependents) has been eliminated.“Itemized deductions” for state and local taxes (primarily income tax and property taxes) will be limited to $10,000.Moving expenses incidental to a change in employment will no longer be deductible except for military personnel.Contributions to Colleges and Universities for athletic seating rights are no longer deductible.Personal casualty and theft losses will no longer be deductible unless in a federally declared disaster area.Miscellaneous “itemized deductions” subject to the “2% reductions rule (unreimbursed business expenses, investment management fees, tax preparation fees, and financial planning fees, etc.) will no longer be deductible.Home equity loan interest will no longer be deductible.Home mortgages created or refinanced after 12/15/17 will no longer be able to deduct the interest paid on balances over $750,000.Alimony paid under agreements created after 2018 will no longer be deductible by the payor or taxable to the recipient.BUSINESSESGood NewsThe “expensing election” under section 179 of the Internal Revenue Code will increase from $500,000 to $1,000,000 and will be allowed for the purchase of additional “qualifying assets”. The definition of “qualifying assets” is expanded to include furniture and equipment purchased for residential rental units and certain improvements to the interior of residential and nonresidential buildings. Roofs, HVAC units, fire protection systems, and alarm systems for residential and nonresidential property, also qualify.An individual will be allowed to reduce his/her taxable income by 20% of his/her share of “qualified trade or business income” from sole proprietorships and “pass through” entities with some limitations. The 20% deduction is limited to 20% of taxable income less capital gains and qualified dividends. Professional service businesses are excluded from the definition of “qualified trade or business”.Bonus first year depreciation has increased from 50% to 100% for “qualifying property” purchased for a business. The definition of qualifying property has been expanded to include used equipment and the same property that qualifies for the “expensing election” under section 170 of the Internal Revenue Code.Leasehold improvement property is now depreciable over 15 years.Most farm equipment is now depreciable over 5 years rather than 7 puter equipment is no longer considered “listed” property. Therefore, you no longer need to keep a log of the computer use.The definition of “small business” has been raised from $10,000,000 to $25,000,000. This affects the ability of businesses to use the cash method of accounting, the accounting for inventories, the accounting for long-term construction contracts, and the capitalization of certain expenses related to the handling of inventory.Businesses will be entitled to a tax credit of 12.5% to 25% of the wages paid to an employee for medical leave if the written medical leave policy allows for2 weeks or greater leave per year for all employees. This provision is only available in 2018 and 2019.BUSINESSESBad NewsThe trade-in of like-kind business equipment is no longer a deferred gain transaction. The trade-in value is treated as a taxable sale.Expenses for entertainment, amusement, and recreation are no longer deductible.The 9% domestic production deduction available to businesses producing goods in the United States is no longer available.The 2-year carry back provision for a Net Operating Loss deduction is now only available to certain farm businesses. Losses can now be carried forward until fully used, however the loss deduction is limited to 80% of the taxable income in the carry forward year.The aggregate of all business losses deductible on a taxpayer’s annual tax return is limited to $500,000 for married couples and $250,000 for individuals. Any excess is carried over to future years. ................
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