New Tax Laws coming in 2018.
Millions of Americans will be affected with the new tax laws.
It’s official. Congress has ushered through the first major tax overhaul since Ronald Reagan was president.The measure, which now awaits President Trump’s signature, is about to shake up life for millions of Americans. It will redistribute the country’s wealth. It could sway decisions about whether to buy a home, or where to send kids to school. It could even affect when unhappy couples decide to get a divorce.As the bill becomes law, here are few things you need to know-
- Standard Deduction raised to $12k for Single and $24k for MFJ filers – almost doubled from the current rates.
- Lower tax brackets for Individuals in each category. Tax rates lower by approx. 9% for the bracket ~$235k -$315k for MFJ category. On an average, tax rates lowered by 2-3% for Individuals and by 5-6% for MFJ categories.
- Working-class families get a bigger child tax credit to up to $2k per child from current law of $1k. Also more credits are refundable for the families that work but don’t earn enough to actually owe any federal income taxes. Now the limit is $1,400 per child.
- You can pass your heirs up to $22 million tax-free for married couples and $11Mn Single filers. This limit has been doubled from current threshold.
- Fewer families will have to pay the individual AMT: Currently the AMT kicks in fully for individuals earning over $120,700 and married couples earning over $160,900. That threshold is lifted to $500,000 for individuals and $1 million for married couples. (Some families in the $200,000 to $500,000 range will still have to pay AMT, but they will pay far less than they were before).
- Alimony payments, , are no longer deductible for the person who writes the checks. This provision will apply to couples who sign divorce or separation paperwork after December 31, 2018
- Elderly dependant extra credit of up to $500- This is a new tax credit for non-child dependents, like elderly parents or children above age 17 or adult children with a disability.
- No deduction for moving expenses – most people will no longer be able the moving costs.
- No penalties on mandatory insurance and the individual mandate on health insurance has been scrapped. Goes into effect in 2019.
- LOSS of Personal Exemption. Current Exemption is $4,100 for each living and breathing human being in the home. Going forward this exemption is eliminated – 0 –
- Elimination of Itemized Deductions:
- Real Estate Taxes on your home + Car Taxes if any + State and Local taxes CANNOT exceed 10,000!
- Mortgage Interest on primary home only. Acquisition cost of new home mortgage cannot exceed $750,000. Home Equity line is NOT Tax deductible from 2018. Previously the Mortgage limit was $1,000,000.
- Second Home: Not deductible for tax purposes in the future but for one final time, this year 2017, we can deduct Mortgage Interest + RE Taxes .
- Advisory Fees+ CPA fees + Employee Business purposes ( Form 2106) are eliminated.
S Corp, LLCs, Partnerships/sole proprietorship – Pass through” companies get a 20 percent reduction
- The majority of these companies get to deduct 20 percent of their income tax-free but this deduction has to be lesser of a) 50% of your share of W-2 wages OR b) 25% of W-2 + 2.5% of Property used in Business.
- Service businesses such as law firms, doctor’s offices and investment offices can take only the 20 percent deduction if they make up to $315,000 (for married couples).
- Massive tax cut for corporations: Starting on Jan. 1, 2018, big businesses’ tax rate would fall from 35 percent to just 21 percent
- No corporate “AMT” tax:
- The final GOP bill gets rid of the corporate alternative minimum tax, a big relief to the business community. The corporate AMT makes it difficult for businesses to reduce their tax bill much lower than 21 percent.
- The way multinational corporations are taxed is about to change.
- The U.S. is switching to a territorial system of taxation, which means companies won’t owe federal taxes on income they make offshore. To help the transition, companies will be required to pay a one-time, low tax rate on their existing overseas profits — 15.5% on cash assets and 8% on non-cash assets, like equipment in which profits were invested.
- Businesses won’t be able to write off settlements costs, pay outs or attorney fees related to sexual harassment if the payments are subject to non-disclosure agreements