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Blog: 2018 Tax Bill To Be Signed

December 20, 2017

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By the time you read this, the tax bill should be signed:

1. The average taxes on corporations around the world is 23%.  When adding average state taxes to the new corporate tax rate of 21%, corporations in the U.S. will be taxed at 26%.

2. When capital investments are made, they can be fully expensed or written off in the year purchased for the next five years.  Small business can write off investments up to $1.0 million, up from $500,000.00. 

3. A new level of complexity is for what they call a 20% pass through deduction which reduces 20% of certain types of non-salary business income from being taxed which effectively lowers the top rate from 39.6% under current law to 29.6%.  This one will generate litigation and lots of regulations.

4. The tax credits that survived include those for electric vehicles, wind energy production, energy efficient buildings, historic rehabilitation, and employer provided childcare.

5. All the new tax brackets will, in general, create at least a short-term reduction in federal taxes for a majority of Americans.  Some of the changes go away in 2025 which will create havoc at that point.  One of the ways that your taxes go down is because they have almost doubled the standard deduction so that it is $24,000.00 for married filing jointly and $12,000.00 for single filers.  Those who itemize are capped at $10,000.00 of combined state and local property taxes and state income and sales taxes.  Thus, only 1 in 10 taxpayers is now expected to itemize deductions. 

6. The child tax credit is doubled from $1,000.00 to $2,000.00 per child.  The personal exemptions are gone. 

7. If you want to buy a big house you still can but the interest deduction is capped at $750,000.00 of mortgage debt on married filing jointly. 

8. The charitable deduction is denied for payments made in exchange for seats at college sport’s games.

9. Although initially discussed, they left alone deductions and exclusions for medical expenses, tuition compensation, student loan interest, and teacher spending.  You can now save for those kids and grandkids who pay tuition for K-12 and home schooling expenses they have expanded the 529 Plan.

10. The Obamacare individual mandate tax is repealed. 

11. We still have a federal estate tax, but it doubles from the $5.6 million per person that was scheduled for 2018 to $11.2 million.  The top tax rate is still 40%.  FYI, annual gift tax exclusion in 2018 is $15,000 per donee.

12. The individual alternative minimum tax is still in existence, but the exemption has been increased to $70,300.00 for non-married filers and $109,400.00 for married filers.

13. Beginning with divorce decrees signed after 12/31/18, alimony payments are no longer deductible and are excluded from the income of the recipient. 

14. Send a thank you note to your children and grandchildren as they will eventually have to pay for this.

Consider in 2017:

a. More charitable contribution.

b. Pay property taxes.

c. Buy some equipment.

d. Move before year end.

e. Prepay farm expenses.

TALK TO YOUR TAX PREPARER FIRST.

This blog post is meant for informational purposes only and is not meant to provide legal advice in any particular circumstance or factual situation.  You should consult with an attorney prior to taking any action regarding the information contained herein.  If you have questions concerning this post, please contact Daniel.Dykstra@heidmanlaw.com.

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