Quick Reference Guide

Transcription

1 Quick Reference Guide A tool for preparing returns At the close of every year, NATP s Tax Knowledge Center pulls together a list of common facts and figures based on current law that tax professionals can reference throughout the coming tax season. You ll find this Quick Reference Guide useful as you prepare returns. Personal Exemption For 2025, the personal exemption deduction for taxpayer, spouse and dependents is zero. However, the personal exemption amount for other purposes (for example, qualifying relative gross income test) is $4,150 for and $4,200 for. Standard Deduction Under the Tax Cuts and Jobs Act (TCJA), the basic standard deduction almost doubled for, and will be adjusted for inflation going forward. MFJ/Surviving Spouse (SS) $24,000 $24,400 HH $18,000 $18,350 Single $12,000 $12,200 MFS $12,000 $12,200 Additional for Age or Blindness MFJ/SS $1,300 $1,300 Single or HH $1,600 $1,650 In tax year, the standard deduction for dependents who only have unearned income is $1,100. If the dependent has both earned and unearned income, the standard deduction is the greater of: $1,100, or The dependent s earned income plus $350, but not more than the basic standard deduction for his or her filing status. Itemized Deductions For 2025, the overall limitation (Pease Limitation) on itemized deductions for taxpayers with AGI exceeding an applicable threshold does not apply. Medical Expense Deduction. For, the deduction for medical expenses on Schedule A, Itemized Deductions, is subject to a 7.5% of AGI limitation for all taxpayers regardless of age. After, medical expenses will be subject to the 10% floor again. Capital Gains Rates The top tax rate for capital gains and qualified dividends is permanently set at 20% for taxpayers with taxable income in the highest tax bracket. The net investment income tax (NIIT) of 3.8% makes the overall capital gain rate for higher income taxpayers effectively 23.8%. The highest tax bracket is 37% for For tax years beginning after 2017, the 0% rate applies to capital gain below the maximum 0% rate amount. The 15% rate applies to capital gain at or above the 0% rate amount and below the maximum 15% rate amount. The 20% rate applies to capital gain natptax.com

2 at or above the 15% rate amount. These amounts will be indexed for inflation. Beginning of Capital Gain Tax Brackets 0% 15% 20% MFJ, SS $0 $77,201 $479,001 HH $0 $51,701 $452,401 S $0 $38,601 $425,801 MFS $0 $38,601 $239,501 Estates and Trusts $0 $2,601 $12,701 0% 15% 20% MFJ, SS $0 $78,751 $488,851 HH $0 $52,751 $461,701 S $0 $39,376 $434,551 MFS $0 $39,376 $244,426 Estates and Trusts $0 $2,651 $12,951 The ordinary income tax rates for short-term capital gain, the unrecaptured 1250 rate of 25% and the collectible rate of 28% continue to apply. Additional Medicare Tax An additional Medicare tax of 0.9% applies to an individual s wages, Railroad Retirement Tax Act compensation and self employment income if such compensation exceeds the following threshold amounts, which are not indexed for inflation: $250,000 for MFJ $125,000 for MFS $200,000 for all others (QW, HH, S) Net Investment Income Tax A 3.8% Medicare tax is applied against net investment income (NII) of individuals, estates and trusts. For this purpose, individual means any natural person, except those who are nonresident aliens. As such, the net investment income tax (NIIT) applies only to citizens or residents of the U.S. The NIIT is 3.8% of the lesser of: Net investment income for the year. The excess of modified adjusted gross income (MAGI) over the threshold amount of $250,000 for MFJ and QW; $125,000 for MFS; and $200,000 for HH and S. Estates and trusts do not have any threshold as defined in They pay tax on the lesser of Income Tax Rates Threshold for Individuals 10% 12% 22% 24% 32% 35% 37% S $0 $9,526 $38,701 $82,501 $157,501 $200,001 $500,001 MFJ, SS $0 $19,051 $77,401 $165,001 $315,001 $400,001 $600,001 MFS $0 $9,526 $38,701 $82,501 $157,501 $200,001 $300,001 HH $0 $13,601 $51,801 $82,501 $157,501 $200,001 $500,001 10% 12% 22% 24% 32% 35% 37% S $0 $9,701 $39,476 $84,201 $160,726 $204,101 $510,301 MFJ, SS $0 $19,401 $78,951 $168,401 $321,451 $408,201 $612,351 MFS $0 $9,701 $39,476 $84,201 $160,726 $204,101 $306,176 HH $0 $13,851 $52,851 $84,201 $160,701 $204,101 $510,301 Threshold for Estates and Trusts Year 10% 24% 35% 37% $0 $2,551 $9,151 $12,501 $0 $2,601 $9,301 $12,751

3 undistributed net investment income or the amount of AGI that exceeds the highest tax bracket of $12,500 for and $12,750 for. Alternative Minimum Tax (AMT) Filing Status Exemption Phaseout MFJ, SS $109,400 $1,000,000 $1,437,600 S, HH $70,300 $500,000 $781,200 MFS $54,700 $500,000 $718,800 For a child subject to kiddie tax Estates and Trusts Filing Status $7,600 plus child s earned income not to exceed $70,300 $500,000 $781,200 $24,600 $81,900 $180,300 Exemption Phaseout MFJ, SS $111,700 $1,020,600 $1,467,400 S, HH $71,700 $510,300 $797,100 MFS $55,850 $510,300 $733,700 For a child subject to kiddie tax Estates and Trusts $7,750 plus child s earned income not to exceed $71,700 $510,300 $797,100 $25,000 $83,500 $183,500 Kiddie Tax For, kiddie tax applies to a child who is required to file a tax return, does not file a joint return, has at least one living parent, has more than $2,200 of unearned income and is any one of the following: Under age 18 at the end of. Age 18 and did not have earned income that was more than half of his or her support. A full-time student over age 18 and under age 24 at the end of and did not have earned income that was more than half of his or her support. In addition, for 2025, the child s unearned income is taxed at the same rates as estates and trusts. Adoption Credit The maximum nonrefundable credit increases to $13,810 for. The credit begins to phase out when MAGI exceeds $207,140 and completely phases out when MAGI reaches $247,140. The maximum credit increases to $14,080 for. The credit begins to phase out when MAGI exceeds $211,160 and is completely phased out when MAGI reaches $251,160. Child and Dependent Care Credit The minimum child and dependent care credit is 20% and the maximum is 35% based on AGI. The amount of eligible expenses is $3,000 for one child and $6,000 for two or more children. Child Tax Credit For 2025, the maximum child tax credit is $2,000 for each qualifying child. Furthermore, the maximum refundable child tax credit is $1,400 per child for and, but is limited to the greater of: 15% of earned income above $2,500, or The excess of the taxpayer s social security taxes for the year over the earned income credit for the year for taxpayers with three or more qualifying children. The TCJA also added a $500 nonrefundable credit for each dependent who is not a qualifying child for purposes of the child tax credit. In other words, taxpayers can claim the $500 other dependent credit (ODC) for qualifying children age 17 or older and qualifying relatives. Beginning with tax year, the child tax credit is not allowed for a qualifying child who does not have a social security number (SSN) by the due date of the tax return (including extensions). However, children without a valid SSN may still qualify for the ODC if they have an ITIN or ATIN by the due date, including extensions. The child tax credit phaseout begins: MAGI MFJ $400,000 All others $200,000 natptax.com

4 Earned Income Tax Credit The maximum amount of income a taxpayer can earn and still be eligible for the earned income tax credit increased. If earned income or AGI exceeds the following amounts, the earned income tax credit is zero. Taxpayer MFJ Other Than MFJ Max. Credit With one child $46,010 $40,320 $3,461 With two children $51,492 $45,802 $5,716 With three or more children $54,884 $49,194 $6,431 With no children $20,950 $15,270 $519 Taxpayer MFJ Other Than MFJ Max. Credit With one child $46,884 $41,094 $3,526 With two children $52,493 $46,703 $5,828 With three or more children $55,952 $50,162 $6,557 With no children $21,370 $15,570 $529 The maximum amount of investment income a taxpayer may have and still be eligible for the credit is $3,500 for and $3,600 for. The maximum American opportunity tax credit is 100% of the first $2,000 of qualified higher education tuition and related expenses, plus 25% of the next $2,000 of such expenses paid during the tax year, equaling a maximum credit of $2,500. Up to 40% of the credit may be refundable, unless it is claimed by a child who could be subject to the kiddie tax provisions no matter how much unearned income the child has. Phaseout American Filing Lifetime Opportunity Status Learning Credit Tax Credit MFJ, SS $160,000 $180,000 $114,000 $134,000 S, HH $80,000 $90,000 $57,000 $67,000 MFS Not Available Not Available Phaseout American Filing Lifetime Opportunity Status Learning Credit Tax Credit MFJ, SS $160,000 $180,000 $116,000 $136,000 S, HH $80,000 $90,000 $58,000 $68,000 MFS Not Available Not Available Educator Expense Deduction An eligible educator can take an above the line deduction for out of pocket classroom related expenses. For and, the deduction may not exceed $250. Education Credits Credit Maximum Lifetime Learning Credit $2,000 American Opportunity Tax Credit Credit $2,500 Maximum Lifetime Learning Credit $2,000 American Opportunity Tax Credit $2,500 The maximum lifetime learning credit is the lesser of 20% of the first $10,000 of qualified higher education expenses or $2,000. National Association of Tax Professionals

5 Student Loan Interest Deduction Taxpayers can deduct up to $2,500 of interest paid on qualified education loans that were used for qualified education expenses of the taxpayer, spouse or dependents when the loan was taken out. To deduct the amount paid, the taxpayer must be legally liable for the loan. Phaseout MFJ, SS $135,000 $165,000 S, HH $65,000 $80,000 MFS Not Available Phaseout MFJ, SS $140,000 $170,000 S, HH $70,000 $85,000 MFS Not Available Health Savings Accounts (HSAs) Like IRAs, funds in HSAs are 100% tax deferred until distributed. A non dependent taxpayer insured by a high deductible health plan (HDHP) may deduct after tax monthly HSA contributions up to an annual limit. Coverage Individual Family Individual Family Annual Contribution Limit HDHP Minimum Deductible HDHP Maximum Out of Pocket $3,450 $1,350 $6,650 $6,900 $2,700 $13,300 $3,500 $1,350 $6,750 $7,000 $2,700 $13,500 If the HSA account beneficiary is age 55 or older at the end of the year, the annual contribution limit is increased by $1,000 [ 223(b)(3)]. If a husband and wife are both age 55 or over and eligible individuals, each one can contribute an additional $1,000 to his or her own HSA (Notice , Q&A #22). In other words, if they both want to take advantage of the additional $1,000, they must each have their own HSA in which to contribute. Long-term Care Premiums Annual Deductible Limit Taxpayer s Age at the Close of the Tax Year 40 or less $420 $420 More than 40, but not more than 50 More than 50, but not more than 60 More than 60, but not more than 70 $780 $790 $1,560 $1,580 $4,160 $4,220 More than 70 $5,200 $5,270 (Archer) Medical Savings Accounts (MSAs) Health Plan Annual Deductible Maximum Out-of- Pocket Expenses Individual $2,300 $3,450 $4,550 Family $4,550 $6,850 $8,400 Individual $2,350 $3,500 $4,650 Family $4,650 $7,000 $8,550 Annual Maximum Deduction* 65% of deductible 75% of deductible 65% of deductible 75% of deductible * If the plan is established by a self-employed individual, the limit is the lesser of the related trade or business earned income or the applicable percentage. Health Flexible Spending Arrangement (FSA) Voluntary employee salary reduction contributions to a health FSA cannot exceed $2,650 for. This amount increases to $2,700 for. QSEHRA For, the total amount of payments and reimbursements under a qualified small employer health reimbursement arrangement (QSEHRA) cannot exceed $5,050 ($10,250 for family coverage). For, this amount increases to $5,150 ($10,450 for family coverage). natptax.com

6 Refundable Credit: Qualified Health Plan The limitation on tax imposed under 36B(f)(2)(B) for excess advance credit payments is determined using the following table: If household income (expressed as a percent of the poverty line) is: Limitation amount for Single filers is: Limitation amount for MFJ, SS, HH, MFS is: Less than 200% $300 $600 At least 200%, but less than 300% At least 300%, but less than 400% If household income (expressed as a percent of the poverty line) is: $775 $1,550 $1,300 $2,600 Limitation amount for Single filers is: Limitation amount for MFJ, SS, HH, MFS is: Less than 200% $300 $600 At least 200%, but less than 300% At least 300%, but less than 400% $800 $1,600 $1,325 $2,650 IRA Contribution Limit to Traditional and Roth IRAs For 2013, the contribution limit to a traditional or Roth IRA is $5,500 ($6,500 for taxpayers age 50 or older). For, this IRA contribution limit increases to $6,000 ($7,000 if 50 or older). IRA: Deduction Phaseout for Traditional IRAs for Taxpayer Covered by Employer Plan S, HH $63,000 $73,000 MFJ, SS $101,000 $121,000 MFS* $0 $10,000 Spouse of Covered Employee S, HH N/A MFJ $189,000 $199,000 MFS $0 IRA: Deduction Phaseout for Traditional IRAs for Taxpayer Covered by Employer Plan S, HH $64,000 $74,000 MFJ, SS $103,000 $123,000 MFS* $0 $10,000 Spouse of Covered Employee S, HH N/A MFJ $193,000 $203,000 MFS $0 IRA: MAGI Phaseout for Roth IRA Contributions MFJ $189,000 $199,000 MFS (lived with spouse) $0 $10,000 S, HH, SS, or MFS* $120,000 $135,000 MFJ $193,000 $203,000 MFS (lived with spouse) $0 $10,000 S, HH, SS, or MFS* $122,000 $137,000 *If a taxpayer is filing MFS and did not live with his/her spouse at any time during the year, he/she is considered Single for IRA deduction purposes.

7 Saver s Credit A saver s credit can be claimed using Form 8880, Credit for Qualified Retirement Savings Contributions. The credit is calculated by multiplying the applicable rate by the qualified retirement plan contributions not to exceed $2,000. The maximum credit is $1,000 per person. The applicable credit rates determined by filing status and MAGI for and follow: 50% 20% 10% No Credit MFJ $0 38,000 $38,001 41,000 $41,001 63,000 Over $63,001 HH $0 28,500 $28,501 30,750 $30,751 47,250 Over $47,251 All others $0 19,000 $19,001 20,500 $20,501 31,500 Over $31,501 50% 20% 10% No Credit MFJ $0 38,500 $38,501 41,500 $41,501 64,000 Over $64,000 HH $0 28,875 $28,876 31,125 $31,126 48,000 Over $48,000 All others $0 19,250 $19,251 20,750 $20,751 32,000 Over $32,000 Annual Gift Tax Exclusion For and, the annual gift tax exclusion is $15,000 per person. The annual exclusion to a spouse who is not a citizen of the United States is $152,000. This annual exclusion increases to $155,000 for tax year. Lifetime Unified Gift/Estate Exclusion The lifetime unified gift/estate exclusion is $11,180,000 for, and increases to $11,400,000 for. Foreign Earned Income Exclusion For, a qualified individual may exclude up to $103,900 of qualified foreign earned income using Form 2555, Foreign Earned Income. For, the indexed amount increases to $105,900. Social Security For, the maximum wages subject to social security tax is $128,400. For, the maximum wage amount increases to $132,900. natptax.com

8 Business Tax Issues Cash Method of Accounting For tax years beginning after 2017, the gross receipts limit under 448(c) for using the cash method of accounting for corporations and partnerships increased under the TCJA to $25 million for. This amount increases to $26 million for. 179 Expensing For, taxpayers may expense up to $1,000,000 of qualifying property acquired for use in a trade or business. The deduction phase out begins at $2,500,000 on purchases of qualifying property, including qualified real property. For property placed in service in tax years beginning after 2017, qualified real property means: Qualified improvement property, and Any of the following improvements to nonresidential real property: roofs, heating, ventilation and air conditioning (HVAC) property, fire protection and alarm systems, and security systems. Before, property used predominantly to furnish lodging or in connection with the furnishing of lodging did not qualify for 179. However, the TCJA removed this restriction for property placed in service in tax years beginning after The SUV limit remains at $25,000 for, but starts to be indexed for inflation after 2017 under the TCJA. The SUV limit increases to $25,500 for. The aggregate amount taxpayers may expense increases to $1,020,000 for. However, the deduction is reduced when the cost of qualifying property exceeds $2,550,000. Luxury Automobile Depreciation Limits for Vehicles Placed in Service in The TCJA substantially increased the luxury auto limits for. In addition, passenger autos and light trucks and vans all have the same limits. Purchased before 9/28/17 Purchased after 9/27/17 1st year $10,000 $10,000 1st year w/ bonus $16,400 $18,000 2nd year $16,000 $16,000 3rd year $9,600 $9,600 Succeeding years $5,760 $5,760 Standard Mileage Rates Business mileage 54.5 Medical or moving mileage 18 Charity 14 Depreciation component 25 Per Diem Allowance Substantiation Method Standard Rate* M&IE Lodging Total Oct. 1, 2017 Sept. 30, Oct. 1, Sept. 30, *See gsa.gov for rates for specific cities. $51 $93 $144 $55 $94 $149 The incidentals allowance is $5 for travel both inside and outside the United States. Per Diem Meal Allowance for Transportation Industry 2017 Travel inside the U.S. $63 $66 Travel outside the U.S. $68 $71 National Association of Tax Professionals

9 Daycare Per Diem for Meals The standard meal and snack rates allowed for day care facilities are equal to the Tier 1 reimbursement rates established by the Child and Adult Care Food Program (CACFP) of the Department of Agriculture. The Department of Agriculture changes the rates every July; therefore, the IRS uses the rates in effect as of December 31 of the prior year for the entire year (for example, Dec. 31,, rates apply for all of ), even though the CACFP rates change in July ( rates). The taxpayer is required to keep a log for the number of meals and snacks served to each child. The rate represents the amount allowed as a deduction per child for the corresponding type of meal served. Meal Contiguous States Alaska Hawaii Breakfast $1.31 $2.09 $1.52 Lunch and Supper $2.46 $3.99 $2.88 Snack $0.73 $1.19 $0.85 Meal Contiguous States Alaska Hawaii Breakfast $1.31 $2.09 $1.53 Lunch and Supper $2.46 $3.99 $2.88 Snack $0.73 $1.19 $0.86 Qualified Business Income (QBI) Deduction For, if a taxpayer s taxable income exceeds $157,500 ($315,000 MFJ), the QBI deduction may be phased out or limited. For, these thresholds increase to: Threshold Single, HH $160,700 MFJ $321,400 MFS* $160,725 *The inflation adjustment is slightly different for MFS, so there is a new threshold for MFS in. Excess Business Loss For tax years beginning after 2017 and ending before 2026, a new excess business loss limitation applies to taxpayers other than C corporations under the TCJA. Section 461(l) limits the ability of noncorporate taxpayers to use trade or business losses against other sources of income, such as wages, interest, dividends and capital gains. For, noncorporate business losses are limited to $250,000 ($500,000 if MFJ). For, these limits increase to $255,000 ($510,000 if MFJ). Self-Employment Optional Methods In, the following dollar limits apply: Under the farm optional method, if the individual s gross farm income is $8,160 ($7,920 for ) or less, or net farm income is less than $5,891 ($5,717 for ), net earnings from self-employment equals the smaller of two-thirds of gross farm income (not less than zero) or $5,440 ($5,280 for ). The individual can use this method year after year. There is no limit on the number of years a taxpayer can use this method. Under the nonfarm optional method, if net nonfarm profits are less than $5,891 ($5,717 for ), and less than % of gross nonfarm income, and net earnings from self-employment were at least $400 in two of the prior three years, net earnings from self-employment equals the smaller of two-thirds of gross nonfarm income (not less than zero) or $5,440 ($5,280 for ). There is a five-year lifetime limit on the use of the nonfarm optional method. However, the five years do not have to be consecutive. natptax.com

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