Individual Taxes. TAX CUTS & JOBS ACT OF Tax Brackets: 7 Tax Brackets: 7 Tax Brackets: 4 Tax Brackets:

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1 COMPARISON OF CURRENT TAX LAW VS. TAX CUTS AND JOBS ACT Individual Taxes Ordinary Income Tax Brackets (Single Tax Brackets Shown) 10%: $0 - $9,325 15%: $9,326 - $37,950 25%: $37,951 - $91,900 28%: $91,901 - $191,650 33%: $191,651 - $416,700 35%: $416,701 - $418, %: $418, %: $0 - $9,525 12%: $9,526 - $38,700 22%: $38,701 - $82,500 24%: $82,501 - $157,500 32%: $157,501 - $200,000 35%: $200,001 - $500,000 37%: $500,001+ Ordinary Income Tax Brackets (Married Filing Joint Tax Brackets Shown) 10%: $0 - $18,650 15%: $18,651 - $75,900 25%: $75,901 - $153,100 28%: $153,101 - $233,350 33%: $233,351 - $416,700 35%: $416,701 - $470, %: $470, %: $0 - $19,050 12%: $19,051 - $77,400 22%: $77,401 - $165,000 24%: $165,001 - $315,000 32%: $315,001 - $400,000 35%: $400,001 - $600,000 37%: $600,001+ Ordinary Income Tax Brackets (Estates and Trusts Tax Brackets Shown) 5 Tax Brackets: 15%: $0 - $2,550 25%: $2,551 - $6,000 28%: $6,001 - $9,150 33%: $9,151 - $12, %: $12, Tax Brackets: 10%: $0 - $2,550 24%: $2,551 - $9,150 35%: $9,151 - $12,500 37%: $12,500+ Kiddie Tax Personal Exemptions Standard Deduction A child's unearned income is taxed at the parents' rate if higher than the child's rate Estate and Trust rates (above) now apply to a child's unearned income $4,050 per person Repeals personal exemptions $6,350 Single $12,700 Married $12,000 Single $24,000 Married

2 Individual Taxes (Cont.) Itemized Deductions 3% phase-out begins at: $261,500 Single $313,800 Married Reduction cannot exceed 80% of itemized deductions. Repeals overall "Pease" limitation of itemized deductions Mortgage Interest (Acquisition Debt) Mortgage interest deduction limitation is $1,000,000 of acquisition indebtedness on principal residence and one secondary residence Reduces mortgage interest limitation to $750,000 for acquisitions, including a secondary residence Acquisitions after December 15, However, exception for contract entered into prior to December 15, 2017 to purchase before January 1, 2018 and purchases before April 1, Mortgage Interest (Home Equity) Mortgage interest deduction on $100,000 home equity indebtedness on principal residence and one secondary residence No mortgage interest deduction for home equity indebtedness. State & Local Taxes Allows an itemized deduction for state and local taxes (SALT) Limits the state and local tax deduction to $10,000 of either SALT and/or property taxes Medical Expenses Medical expense deductions are allowed if more than 10% of AGI (7.5% if 64+ old) Temporarily expands medical deduction to 7.5% of AGI for 2017 & , 2016 and before January 1, Charitable Gift Deductions Deductions for contributions to qualified charities are allowed as an itemized deduction. Cash contributions limited to 50% of AGI. No significant change from current law. Cash contributions limitation increased to 60% of AGI. Other Deductions Allows other Misc. deductions Repeals all miscellaneous itemized deductions that are subject to the twopercent floor under the current law. Alimony Alimony paid is a deductible expense. Alimony received is taxable income. Effective for divorces executed after December 31, 2018, alimony paid will not be treated as a deduction and alimony received will not count as taxable income. Contracts entered into or modified after December 31, 2018.

3 Individual Taxes (Cont.) Repeals the deduction for moving expenses, except for members of the military Moving Expenses Allows "above-the-line" deduction for qualifying moving expenses Child Tax Credit Partially refundable $1,000 child tax credit for the first two children, with a less generous Additional Child Credit for third and subsequent children. Increases the child tax credit to $2,000. Of this, $1,400 would be refundable, with the refundable portion indexed to inflation. All dependents ineligible for the child tax credit are eligible for a new $500 per-person family tax credit. Provisions begin to phase out at $400,000 ($200,000 for single filers). Treatment of Pass-through Income Business income passed through to partners or shareholders and taxed at ordinary income rates Adopts a 20 percent deduction for pass-through income, limited to the greater of (a) 50 percent of wage income or (b) 25 percent of wage income plus 2.5 percent of the cost of tangible depreciable property for qualifying businesses, including publicly traded partnerships but not including certain service providers. Limitations (both caps and exclusions) do not apply for those with incomes below $315,000 (joint), and phase out over a $100,000 range. Therefore, service partners are allowed the 20% deduction if income is less than $315,000 (joint). Alternative Minimum Tax Imposes a two-rate alternative minimum tax (AMT) with an $86,200 exemption and a $164,100 exemption phase-out for joint filers. (Other exemptions and phase-out thresholds exist for single filers and married filing separately.) Increases the exemption to $109,400 and raises the phase-out threshold to $1 million for joint filers. (Other exemptions and phase-out thresholds exist for single filers and married filing separately, and are also adjusted.)

4 Individual Taxes (Cont.) The ability to recharacterize IRA conversions is eliminated. Clients who were relying on recharacterization provision to "undo" Roth IRA conversions need to be aware that this won't be available after December Roth Recharacterization Taxpayers who make an IRA conversion are allowed to undo (or recharacterize) the conversion by the due date of the tax return. Estate, Gift and Generation Skipping Transfer Taxes $5 million Basic Combined Exclusion from Estate & Gift Taxes, indexed for inflation to $5.6 million in 2018 $5 million exclusion from Generation Skipping Transfer (GST) Tax, indexed for inflation to $5.6 million in 2018 Exclusion amount doubled increased to $11.2 million in 2018, estate tax retained The doubled lifetime exclusion would expire after 2025 and return to the current exclusion amounts. Section 529 Plans Earnings can grow tax free and be used for collegiate qualified education expenses Expands the use of 529 accounts to cover qualified education expenses for K- 12 students, including private school expenses but not including homeschooling expenses. Individual Mandate Penalty Taxpayers without health insurance are subject to a penalty of 2.5% of income, or $695 per adult and $348 per child, up to a family max of $2,085. Reduces the individual mandate penalty to $0, effective January 1, , Deductibility of Collegiate Athletic Tickets A taxpayer may deduct 80% of amount paid to institutions of higher educations where the taxpayer receives a right to purchase tickets for seating at an athletic event in a stadium at the institution. Repeals the charitable deduction for payments made in exchange for college athletic event seating rights.

5 Corporate Tax Rates Business Taxes Maximum tax rate of 35% Maximum rate of 21% beginning January 1, 2018 Alternative Minimum Tax Applicable to corporations Repeals corporate alternative minimum tax Capital Investment In relevant part, allows 50 percent bonus depreciation of short-lived capital investment, such as machinery and equipment, through 2020, and offers Section 179 small business expensing with a cap of $500,000 and a phaseout beginning at $2 million. Allows full (100 percent) expensing of short-lived capital investment, such as machinery and equipment, for five years, then phases out the provision over the subsequent five, and raises Section 179 small business expensing cap to $1 million with a phaseout starting at $2.5 million. Capital acquisitions after September 27, 2017 Interest Expense Deduction Business interest paid or accrued deductible, subject to limitations Caps net interest deduction at 30 percent of earnings before interest, taxes, depreciation, and amortization (EBITDA) for four years, and 30 percent of earnings before interest and taxes (EBIT) thereafter. Net Operating Losses NOLs may be carried back two years and carried over 20 years to offset taxable income. Eliminates net operating loss carrybacks while providing indefinite net operating loss carryforwards, limited to 80 percent of taxable income. Like-Kind Exchanges Allows deferral of gain for like-kind property exchanges Deferral of gain limited to real property exchanges Meals & Entertainment Deduction Change A 50% deduction is allowed for Meals & Entertainment when such activities are businessrelated Entertainment is no longer allowed as an expense. Meals (related to business) are still 50% deductible.

6 International Tax International Tax System Corporations taxed on worldwide income No rules addressing repatriation from foreign corporations Moves to a territorial system with anti-abuse rules and a base erosion anti-abuse tax (BEAT) at a standard rate of 5 percent of modified taxable income over an amount equal to regular tax liability for the first year, then 10 percent through 2025 and 12.5 percent thereafter, with higher rates for banks. Enacts deemed repatriation of currently deferred foreign profits at a rate of 15.5 percent for liquid assets and 8.0 percent for illiquid assets. Discussed Provisions That Did Not Make The Final Bill law. The House version of the Bill included repeal of the deduction for student loan interest that was not included in the final Bill. Student Loan Interest Allows "above-the-line" deduction for student loan interest Education Credits Allows for American Opportunity Credit of up to $2,500, Hope Scholarship Credit of up to $1,500, and Lifetime Learning Credit up to $2,000 with various income phase outs. law. The House version of the Bill included simplification and reduction of education credits which was not included in the final Bill. Stock Sales If investors want to sell a certain stock, they can pick from any of the tax lots they own. law. The first-in, first-out (FIFO) method (which appeared in the Senate's version of the bill) was not included in the final Bill.

7 Discussed Provisions That Did Not Make The Final Bill (Cont.) law. Net Investment Income Tax A 3.8% additional tax is applicable to net investment income if a taxpayer's income exceeds certain thresholds. Medicare Tax A.9% additional tax is applicable to wages, compensation and selfemployment income if a taxpayer's income exceeds certain thresholds. law. Gain Exclusion on Sale of Home Taxpayers can exclude gain on the sale of their home up to $250K/single or $500K/joint. Taxpayers' must live in the home two out of the last five years to qualify for this gain exclusion law. Both the House and Senate versions of the bill limited the exclusion by stating the taxpayer must live in the home at least five years out of the past eight years to qualify for the exclusion. The final bill did not include these provisions, thus no change. Capital Gain & Qualified Dividend Rates Rates of 0%, 15%, and 20% (plus 3.8% NIIT) No rate changes from current law. Similar breakpoints as current law.