Tax Cuts and Jobs Act of 2017

Transcription

1 Tax Cuts and Jobs Act of 2017 INDIVIDUALS Standard Deduction Personal exemption State income tax/sales tax itemized deduction Mortgage interest Property taxes itemized deduction Tax brackets Alternative minimum tax (AMT) Individual health mandate Standard deduction is currently $6,350 single and $12,700 married $4,150 benefit for each personal exemption Currently no limit Principle residence and second residence up to $1,000,000 plus additional $100,000 related to home equity debt Currently no limit See Exhibit 1 at end of this document Exemption amounts are $86,200 married filing jointly (MFJ) and $43,100 (single). Phase-out thresholds are $164,000 (MFJ) and $254,450 (single) Individual health mandate is in place $12,000 Single $24,000 Married Additional deduction for aged and blind remains Capped at $10,000 when combined with property taxes; bill explicitly denies ability to prepay 2018 income taxes in 2017 For homeowners with new mortgages on first or second homes the home mortgage interest deduction will be available up to $750,000, but the home equity interest deduction has been eliminated. Capped at $10,000 when combined with state income tax / sales tax deduction See Exhibit 1 at end of this document Retained but raises exemption amount to $109,400 (MFJ) and $70,300 (single). Phase-out threshold increased to $1,000,000 (MFJ) and $500,000 (single)

2 INDIVIDUALS continued Medical expense itemized deduction Child tax credit Personal casualty and theft losses Unreimbursed employee expenses Tax preparation fees Currently 10% adjusted gross income (AGI) limitation $1,000 for children under age 17 Normally nonrefundable unless meet income rules Phase out begins at $110,000 (MFJ) and $75,000 (single) Individual taxpayers were generally allowed to claim an itemized deduction for uncompensated personal casualty losses, including those arising from fire, storm, shipwreck, or other casualty, or from theft. Were consolidated with other miscellaneous itemized deductions and were deductible to the extent they exceeded 2% of AGI Were consolidated with other miscellaneous itemized deductions and were deductible to the extent they exceeded 2% of AGI 7.5% AGI limitation for 2017 and % AGI limitation starting in 2019 Increased to $2,000 for children under age 17 Refundable amount limited to $1,400 Phase out increased to $400,000 (MFJ) and $200,000 (single) $500 nonrefundable credit provided for certain non-child dependents (except for presidentially-declared disaster areas)

3 INDIVIDUALS continued Home office expenses Phase-out limitation on overall itemized deductions Alimony deduction Student loan interest Were consolidated with other miscellaneous itemized deductions and were deductible to the extent they exceeded 2% of AGI Higher-income taxpayers who itemized their deductions were subject to a limitation on these deductions Alimony and separate maintenance payments were deductible by the payor spouse and includible by the recipient spouse You can deduct up to $2,500 in interest per year depending upon income levels Both deduction and income are eliminated for agreements executed after 12/31/18 Retained Educator deduction Up to $250 page one deduction Retained Moving expenses Taxpayers could claim a deduction for moving expenses incurred in connection with starting a new job if the new workplace was at least 50 miles farther from a taxpayer's former residence than the former place of work. except for certain armed forces members ESTATE TAX Estate tax Today 40% on assets over $5.49 million per person Doubles basic exclusion and does not repeal estate taxes. Inflation adjusted exclusion is expected to be $11.2 million in 2018.

4 CORPORATIONS C corporations Current tax bracket = 35% 21% for years beginning after December 31, 2017 New equipment bonus depreciation rules Pass through entities C corporations forced onto accrual method 50% bonus depreciation for new equipment through 12/31/17 40% bonus depreciation for new equipment through 12/31/18 30% bonus depreciation for new equipment through 12/31/19 No additional bonus depreciation after 2019 Currently taxed at ordinary income tax rates of the shareholders Receipts < $5M 100% bonus depreciation for beginning 9/27/17-12/31/22 80% bonus depreciation for beginning 1/1/23-12/31/23 60% bonus depreciation for beginning 1/1/24-12/31/24 40% bonus deprecation for new and used equipment beginning 1/1/25-12/31/25 20% bonus depreciation for beginning 1/1/26-12/31/26 Generally, income is taxed at shareholders ordinary tax rates after owners taken an addt l. deduction of 20% of the passthrough income limited to the greater of (1) 50% of wages paid by the business or (2) the sum of 25% of the shareholders allocable share of W-2 wages paid by the business plus 2.5% of the unadjusted basis of property used by the business. Generally, income is taxed at shareholders ordinary tax rates after owners taken an addt l. deduction of 20% of the passthrough income limited to the greater of (1) 50% of wages paid by the business or (2) the sum of 25% of the shareholders allocable share of W-2 wages paid by the business plus 2.5% of the unadjusted basis of property used by the business.

5 CORPORATIONS Continued C corporations forced onto accrual method Receipts < $5M Receipts < $25M All businesses with inventory forced onto accrual method No threshold, but see Rev. Procs and Receipts < $25M Forced switch from the completed contract method to percentage of completion for accounting for long-term contracts Receipts < $10M Receipts < $25M Requirement to apply Section 263A Unicap rules to inventory Net operating losses No threshold for producers, $10M in receipts for resellers Carry back two years, forward 20 Receipts < $25M No carry back, carry forward indefinitely, limited to 80% of taxable income Interest deduction Unlimited Limited to 30% of "adjusted taxable income"), if average receipts > $25 M Section 179 expense Limited to $500,000 Limited to $1 million with phase out starting at $2.5 million Entertainment expenses 50% deductible Nondeductible Section 199 manufacturers deduction Up to 9% of domestic production activities Farm equipment depreciation 7 years, 150DB Five years, 200DB (150DB still would apply to 15 and 20-year property); grain bins and fences depreciated over seven years, land improvements over 15 years, single purpose structures over 10 years

6 CORPORATIONS Continued Real estate depreciation 27.5 years or 39 years Separate definitions of qualified leasehold improvements, qualified restaurant property and qualified retail improvement property are eliminated and a general 15- year recovery period and SL depreciation are provided for qualified improvement property; 27.5 year and 39 years recovery lives remain Like kind exchanges Personal property and real property qualify Only real property qualifies

7 EXHIBIT 1 TAX BRACKETS Individual Tax s Single Taxpayers Current Reconciled $0 - $9,525 10% 10% $9,525 - $38,700 15% 12% $38,700-$82,500 25% 22% $82,500-$93,700 25% 24% $93,700-$157,500 28% 24% $157,500-$195,450 28% 32% $195,450 - $200,000 33% 32% $200,000 - $424,950 33% 35% $424,950-$426,700 35% 35% $426,700 - $500, % 35% > $500, % 37% Married Taxpayers Current Reconciled $0 - $19,050 10% 10% $19,050-$77,400 15% 12% $77,400-$156,150 25% 22% $156,150-$165,000 25% 22% $165,000-$237,950 25% 24% $237,950-$315,000 28% 24% $315,000-$400,000 33% 32% $400,000 - $424,950 33% 35% $424,950-$480,050 33% 35% $480,050-$600,000 33% 35% > $600,000 35% 37% Capital Gain/Dividend s Single Taxpayers Old Reconciled $0 - $38,700 0% 0% $38,700-$424,950 15% 15% $424,950-$426,700 15% 20% > $426,700 20% 20% Married Taxpayers Old Reconciled $0 - $77,400 0% 0% $77,400-$480,050 15% 15% > $480,050 20% 20%