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The Tax Cuts and Jobs Acts has created a myriad of opportunities to reduce your taxes. Although some deductions have been eliminated to simplify the tax return, other venues exist to take advantage of the new tax law. Below are key highlights of the changes that the Tax Cuts and Jobs Acts has implemented:
1. Schedule A - Miscellaneous Deductions: Casualty loss is now not deductible unless it is a federally declared disaster. If you have experienced a loss, contact us to see if you qualify. Itemized deduction phase out rule was also elimiated.
2. Section 179 Deduction: The limit for 179 deduction has been set to 1mil.
3. Bonus Depreciation: First year bonus is set to 100% for both new and used qualified equipment.
4. 529 Plan: Distributions of 10,000.00 per yar to cover tuition are free of taxes.
5. Standard deduction have nearly doubled - but you can no longer claim dependents.
6. Kiddie tax is now subject to the Estate and Trust tax rates.
7. American opportunity tax credit is now $2500.00 per student - other rules apply.
8. Pass-Through Business Deduction - newly established and generally equals 20% of qualified business income (QBI). This is available to individuals, estates, and trust.
9. Auto Depreciation Limits were increased dramatically. Contact us to assess your specific scenario.
10. Affordable Health Care penalty applies to 2018. However, it will not apply in 2019.
11. Meals while away on business is still 50% deductible.
12. Alimony payments with divorce decree after 12/31/2018 are no longer tax deductible.
13. Hobby income is taxable but no longer can you deduct the expenses on Schedule A.
14. Elect to amortize $5,000.00 of start-up expenditures at the commencement of the business.
15. Rental properties - under IRC Sec. 212, you may qualify to deduct rental expenses when property is held out for rent and not yet rented - this changes things as established by the court case Hattie M. Bonds, TC Summary Opinion 2011-122 (2011).
16. Converting property from personal to rental to take advantage of deducting loss - ensure to apply the new special basis rule that establishes the tax basis for the tax loss purposes of a converted personal residence equals the lesser of the FMV of the property OR the property's normal basis. If a property is declining in value, convert it to a rental sooner rather than later.
17. Employing your child if under the age of 18 can reap benefits of not being subject to social security, medicare, nor FUTA tax on the earnings of the child. Contact us regarding the rules.
18. S Corporations earnings are still not subject to social security and medicare tax. However, you must pay yourself a reasonable wage.
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