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What You Need to Know About the New Tax Reform Law July 27, 2018

Downtown West, Minneapolis
What You Need to Know About the New Tax Reform Law, Minneapolis, Minnesota

In December 2017, the Tax Cuts and Jobs Act (the Act) was signed into law. This sweeping Act affects how taxpayers will file their 2018 income tax returns. Below are some highlights of the key changes.

 

Key Tax Reform Changes Taxpayers Need to Know

 

Itemized Deductions
The Act eliminated many itemized deductions, including miscellaneous itemized deductions such as employee business expenses, tax preparation fees and investment expenses. The Act also limited some popular itemized deductions such as state and local income taxes, real estate taxes, and mortgage interest. For example, state and local income taxes plus real property taxes can be deducted, but only up to a combined total limit of $10,000. Before the Act, there was no limit in place, which allowed many taxpayers the opportunity to itemize deduction. Additionally, interest on home equity loans is no longer deductible and interest on new home mortgages is limited to interest paid on a maximum of $750,000 if married filing jointly. An experienced tax specialist can outline all the itemized deductions that have been modified under the Act.

 

Alternative Minimum Tax
The corporate alternative minimum tax (AMT) was also eliminated. Previously, the AMT was at a 20% rate.  However, beginning in 2018, corporations will no longer have to calculate AMT and any
tax help AMT credit carryovers will be refundable and can be fully utilized. For individual filers, fewer people will be subject to AMT. Single filers who earn at least $70,300 and married couples who earn at least $109,400 will be exempt from AMT.

 

Pass-Through Deduction
Business owners who are organized as “pass-through” entities are eligible to take a pass-through deduction on their individual tax returns. This deduction can be as high as 20% of the individual’s share of qualified business income. The new change applies to owners, partners and shareholde
rs of limited liability companies (LLCs), partnerships, and S-corporations. SDK is hosting a seminar on this topic, click here to see details.

 

Child Tax Credits
Under the Act, the maximum child tax credit has increased from $1,000 to $2,000 per qualifying child, of which up to $1,400 can be refundable. This means even if a taxpayer owes no taxes, they can still receive a child tax credit. The phase out
range for taxpayers has also increased. Single parents with earnings up to $200,000 and married couples with a combined income of up to $400,000 are now eligible to claim the expanded credit.

 

These are just a few of the changes within the 2017 Tax Cuts and Jobs Act. Our team of tax specialists at SDK can help you navigate how the Act will impact your tax situation. Whether you’re a business owner or a high-net-worth individual with more complex investments, you will receive personalized and expert attention. To get ready for the 2018 tax filing season now, email rchurness@sdkcpa.com to schedule a consultation.

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