Tax Cuts and Jobs Act. Archie Macias Macias Tax Service

Transcription

1 Tax Cuts and Jobs Act Archie Macias Macias Tax Service

2 Overview Business-related Tax Law Changes Pass-Through Entities Individual Changes

3 Business-related Tax Law Changes Corporate tax rates Cost recovery provisions Business reforms for deductions and exclusions

4 Corporate Tax Rates

5 Tax Rates to 50,000 15% 50,001 to 75,000 25% 75,000 to 100,000 34% 100,001 to 335,000 39% 335,001 to 10,000,000 34% 10,000,001 to 15,000,000 35% 15,000,001 to 18,333,333 38% 18,333,334 and over 35% to 50,000 21% 50,001 to 75,000 21% 75,000 to 100,000 21% 100,001 to 335,000 21% 335,001 to 10,000,000 21% 10,000,001 to 15,000,000 21% 15,000,001 to 18,333,333 21% 18,333,334 and over 21%

6 Comparison 50,000 15% 7,500 75,000 25% 18, ,000 34% 34,000 1,000,000 21% 210, ,000 39% 130, ,000 34% 149,600 1,000, ,750 1,000, ,000

7 Other Changes Dividends received deduction % ; 80% for a 20% owned corporation %; 50% for a 20% owned corporation Alternative Minimum Tax Repealed Permanent law changes No sunset provisions

8 Cost Recovery Provisions

9 Depreciation Bonus Depreciation (Includes used property) 100% for property placed in service from 9/28/2017 to 12/31/ % for property placed in service during calendar year % for property placed in service during calendar year % for property placed in service during calendar year % for property placed in service during calendar year 2026 May elect to claim 50% bonus first-year depreciation

10 Expensing Capital Assets Section 179 Depreciation Old law limited annual amount to $500,000 Phase out begins at $2,000,000 New law raises limit to $1,000,000 Phase out begins at $2,500,000 No sunset provision

11 Public Utility Property Normalization accounting Difference between book depreciation (ratemaking) and tax depreciation Higher tax depreciation not used for ratemaking purposes Excess reserves Difference between old rate of 35% vs new rate of 21%

12 Cars Larger depreciation caps $10,000 limit year placed in service $16,000 for second year of service $9,600 for third year of service $5,760 for fourth, fifth, and sixth year of service More than three times higher than limits of old law

13 Listed Property Types include Passenger automobiles Other transportation vehicles Recreation and amusement property Computer equipment (remove from list in 2018) Anything listed in the regulations Documentation requirements

14 Sunset Provisions New law effective for 8 years Suspended on 1/1/2026 Future law changes needed Specter of raised taxes in 2026?

15 Pass-Through Entities

16 Pass-Through Income Deduction New deduction for noncorporate taxpayers 20% of qualified business income Multiple limitations Regulations needed

17 Business Related Reforms for Deductions and Exclusions

18 Entertainment Expenses Old law: 50% of qualified entertainment expenses Entertainment, amusement or recreation Membership dues to clubs New law: Completely nondeductible Meals deductible at 50%

19 Employer Eating Facilities Old law: Fully deductible of on or near employer premises Convenience of employer Monthly company meetings New law: 50% deductible through 2025 No deduction after 2025 Regulations needed

20 Transportation Fringes Old law: Reimbursement for transportation in commuter vehicle Deductible by employer/excludible as income to employee Includes commuting costs; transit passes; parking New law: No deduction for employer Exception for employee s safety Not taxable to employee

21 Fines and Reporting of Fines Fines and penalties not deductible Amounts paid to come into compliance are deductible Governmental agencies that are complainants or investigators Impose fines Report to IRS amounts in excess of $600 M-1 reconciliation item?

22 Settlement for Sexual Abuse or Harassment Suit Old law: Deduction permitted for settlements New Law: Deduction denied IF settlement amount subject to a NDA Includes attorney fees

23 Lobbying Local Governments Lobbying on federal level Always nondeductible Influencing legislation vs education Did not apply to local councils New law Denial of deduction extended to local governmental units

24 Individual Tax Changes

25 Tax Brackets to 2025 Married Filing Jointly Rate Threshold Rate Threshold 10% 0 10% 0 15% 18,650 12% 19,050 25% 75,900 22% 77,400 28% 153,100 24% 165,000 33% 233,350 32% 315,000 35% 416,700 35% 400, % 470,700 37% 600,000

26 Affordable Care Act 2017 the penalty: $695 per adult; $ per child; maximum of $2, the penalty: Not announced yet but indexed for inflation 2019 to 2025: Penalty is ZERO Individual mandate to have health insurance remains law

27 New Withholding Tables New withholding tables should be in effect now Elimination of personal exemptions and higher standard deduction may require a new W-4 Removal of tax free status from some employee benefits

28 Personal Exemptions/Standard Deductions Filing Status Personal Exemptions Standard Deduction Single 4,050/person Zero 6,350 12,000 Married Filing Jointly 4,050/person Zero 12,700 24,000 Married filing Separately 4,050/person Zero 6,350 12,000 Head of Household 4,050/person Zero 9,350 18,000

29 Maximum Tax Rates on Capital Gains and Qualified Dividends 0% 15% 20% Filing Status Over Single 37,950 38, , , , ,800 Married Filing Jointly 75,900 77, , , , ,000 Married Filing Separately 37,950 38, , , , ,500 Head of Household 50,800 51, , , , ,500

30 Changes to Itemized Deductions Medical Deductions 2017 and 2018, the deduction threshold will be 7.5% of AGI 2019 and beyond, back to 10% of AGI State and Local Taxes Includes property and state income or sales taxes Overall cap is $10,000 (MFJ) and $5,000 (Single) Likely tax hike for higher income people in high tax states

31 Changes to Itemized Deductions Charitable Contributions Deduction limit increased from 50% to 60% of AGI Personal Casualty and Theft Losses Deduction suspended for Unless attributable to federally declared disaster Miscellaneous Itemized Deductions Tax prep fees, investment advisory fees eliminated Previously deductible to extend exceeds 2% of AGI Deduction repealed

32 Changes to Itemized Deductions Mortgage Interest Total debt limit reduced from $1,000,000 to $750,000 Home equity indebtedness no longer available Effective December 15, 2017 Any changes to grandfathered mortgage brings it under new rules

33 Child Tax Credit Increased to $2,000 from $1,000 per child Maximum refundable credit is $1,400 per child Income phase outs increased dramatically $110,000 of MAGI for MFJ $400,000 of AGI for MFJ

34 College Athletic Seating Rights Old law allowed 80% of contribution as a charitable deduction New law eliminates this deduction Development Directors and Athletic Directors will be creative

35 Alimony Current Law Deductible by payor; income to the recipient Child support nondeductible; nontaxable New Law No deduction for alimony payments Not taxable to the recipient Effective for divorce agreements executed after 12/31/2018

36 IRA Recharacterization Old law Traditional IRA can be recharacterized as a Roth IRA Old law Roth IRA can be recharacterized as a traditional IRA New law No longer allowed

37 Discharged Student Loan Debt Generally when debt is forgiven, the amount is taxable income New law allows for two exceptions Death Total and permanent disability

38 Dirty Dozen Phishing Fake s or websites IRS does not contact you by Phone Scams IRS does not contact you by phone IRS does not threaten arrest IRS cannot revoke business licenses, or immigration status

39 Dirty Dozen Return Preparer Fraud Guarantee a refund Lacks credentials Fake Charities Appear during disasters Must be an exempt organization (501(c)(3)

40 Thank you Archie Macias Macias Tax Service 7615 E Champions Ct Wichita, KS archie@maciastaxservice.com (316)