2018 Tax Tips
Federal Tax Law Changes Included in the Tax Cuts and Jobs Act
On December 22, 2017 the President signed into law the Tax Cuts and Jobs Act. This bill made many changes for individuals and businesses of which the vast majority of its provisions go into effect beginning in 2018. Most of the individual provisions are effective for the years 2018 – 2025 while most of the business provisions are permanent.
2018 Individual Estimated Payments and the Tax Cuts and Jobs Act
Taxpayers who will have business income that they will report on Schedule C, E or F on their 2018 federal income tax return and therefore may need to make 2018 estimated tax payments will need to take into account the following changes that go into effect in 2018 due to the recently passed Tax Cuts and Jobs Act.
Sole proprietors that are filing Schedules C, E or F for 2018 will need to be sure that they take into account the new 20% deduction for pass-through income that was included in the Tax Cuts and Jobs Act.
Sole proprietorship includes individuals who file Schedule C, E or F.
A deduction for entertainment expenses is no longer allowed on Schedule C beginning in 2018.
Depreciation Limits for Luxury Automobiles and Personal Use Property (Listed Property)The yearly limitations for passenger autos placed in service after December 31, 2017 have been increased as follows: $10,000 for year placed in service $16,000 for second year $9,600 for the third year $5,760 for fourth and later years
ACA Penalty for Individuals not having Health Insurance
The penalty for not having health insurance will no longer be applicable beginning in 2019.
Therefore the penalty will still apply for 2017 and 2018.
Child Tax Credit and Family Credit
The child tax credit is increased to $2,000 per qualifying child. Of this amount $1,400 is eligible to be refundable.
The age limit for a qualifying child remains as it has been at under the age of 17.
There will be a $500 nonrefundable credit for children age 17, 18 or are full time students age 19-24 and other qualifying dependents.
The credit begins to phase out at $400,000 for joint filers and $200,000 for other taxpayers.
Also, any child must have a Social Security Number to be eligible for the child tax credit. The earned income threshold for the refundable tax credit will be $2,500.
There is a limit of $10,000 for the total of State and local income taxes and real estate taxes. The new law also states that an itemized deduction is not allowed for prepayment of 2018 income tax in 2017 in order to avoid the limitation in 2018.
The following provisions are no longer applicable: Can no longer exclude moving expense reimbursements from income With the exception of members of the military, individuals may no longer take a deduction for moving expenses.
Tax on unearned income of children
The tax on the unearned income of children (kiddie tax) has been changed by effectively applying the rates applicable to trusts to the net unearned income of a child. Specifically, the amount of taxable income taxed at a 12-percent rate may not exceed the amount of taxable income in excess of the net unearned income of the child. The following individual provision is permanent beginning in 2019:
Beginning in 2019, alimony and separate maintenance payments are not deductible by the payor spouse. Also, alimony and separate maintenance payments are no longer included in income of the receiving spouse.