The Tax Cuts and Job Act (The TCJA) has brought about many changes for both individual and business taxes. While some revisions and additional legislation may be on the way, below are five changes that may affect your individual income tax liability in 2018:
1. Itemized Deductions. Your benefits for 2018, may differ from what they have been in the past. State and local tax deductions are now capped at $10,000 and personal deductions for tax preparation fees, investment fees, and unreimbursed employee business expenses have been eliminated. Personal exemptions have also been eliminated, and the TCJA increased the standard deduction from $12,700 to $24,000 for a joint return.
2. Excess Business Loss Limitation. In the past, there has not been a dollar limitation on business losses and taxpayers were able to offset other sources of income such as capital gains, wages, dividends or interest. In 2018 the TCJA business losses are limited to a new $500,000 for a joint return and any excess is carried forward.
3. Individual Tax Rate Changes. While there are still seven tax brackets, the top tax rates have been reduced from 39.6% to 37% and the brackets have been extended. The 3.8% Net Investment Income Tax has remained the same for 2018.
4. 20% Qualified Business Income Deduction. The TCJA introduced a 20% deduction for qualified business income. There are thresholds- and the deduction could be limited and subject to additional thresholds once taxable income goes above $315,000 for married filing jointly.
5. Alternative Minimum Tax Exemption (AMT) Phase-out Increase. The TCJA increased the AMT exemption thresholds and phaseouts. The number of taxpayers subject to it has been reduced, as the AMT exemption is now less likely to be reduced or eliminated by higher income levels. Additionally, state and local income taxes along with other preference items are no longer available or subject to limitations.
These are just some of the changes the TCJA has created. To learn more or have your questions answered; contact your Sweeney Conrad advisor at 425.629.1990 or firstname.lastname@example.org