Changes Resulting from the Tax Cuts and Jobs Act

The tax reform legislation recently signed into law significantly changes the landscape for individuals and businesses beginning January 1, 2018, and continuing for many years to come. For many taxpayers, the changes made by the legislation present a host of tax planning challenges and opportunities going forward. It should be noted that most of the provisions affecting individuals will sunset starting in 2026, while those affecting businesses are generally permanent.

Highlighted below is an overview of some of the more significant changes made by the reform legislation. Additional detail can be found in the links provided.

Changes Affecting Individuals

  • New lower tax rates and brackets, increase in standard deduction, repeal of personal exemption
  • Alternative Minimum Tax improved
  • Increase in child tax credit and new family tax credit
  • Dollar limit on deduction for real estate taxes, state and local income and sales tax
  • New limit on mortgage interest deduction
  • Changes in medical expense deduction
  • All miscellaneous deductions subject to 2% of AGI suspended
  • Overall limitation on itemized deductions suspended
  • Adjustments to income modified or eliminated
  • Changes to education incentives now allows expenses for elementary or secondary school
  • Changes to the Kiddie Tax
  • Obamacare provisions
  • Click here for additional details

Changes Affecting Businesses

  • Reduction in corporate tax rates
  • Elimination of corporate Alternative Minimum Tax
  • Liberalize the rules for allowing cash method of accounting
  • Increase bonus depreciation to 100% and increase section 179 to $1 million
  • New deduction for pass through entity business income
  • Repeal the domestic production activities deduction
  • Elimination of entertainment expenses deduction
  • New loss limitation for non corporate taxpayers
  • New limits and carryover provisions on net operating loss
  • Like kind exchanges limited to real property only
  • Click here for additional details

Additionally, changes have been enacted to the estate tax. The legislation doubles the estate and gift tax exclusion amount to $11.2 million for 2018 effective for decedents dying and transfers made after 2017 and before 2026. The exclusion will be indexed for inflation. After 2025, the exclusion amount would return to current law. The current rule allowing a step up in basis for inherited property will not change. In light of the provisions in the legislation, we recommend a review of your estate plan to make sure that it continues to satisfy your tax and family-related objectives while remaining as flexible as possible.

To learn more, or to discuss specific strategies, pleaseĀ contact us. We would be happy to meet with you.