With 2019 quickly approaching, now is the time to begin considering your 2018 tax return. As Congress has recently implemented a number of tax law changes, we’d like to provide an update to help you stay informed and save time on planning ahead for your returns.
It’s likely that you’re familiar with the Tax Cuts and Jobs Act of 2017 (TCJA), but may be wondering how the changes will impact you. As tax season approaches, our team of trusted tax advisers and consultants at Lodovico & Associates compiled a quick summary of highlights from TCJA for your reference and consideration.
In brief, here is what you need to know:
- Increased standard deductions: Those who are married and filing jointly will now receive a $24,000 standard deduction, up from $13,000. Single taxpayers or those filing separately, now are applicable for a $12,000 standard deduction, up from $6,500.
- New tax rates and brackets: Seven brackets now apply to individuals. The new law reduces the rates to 10%, 12%, 22%, 24%, 32%, 35% and 37%.
- Child tax credit: The child tax credit has doubled to $2,000 per qualifying child. Starting in 2018, taxpayers claiming a child credit will have to show the child’s Social Security number (SSN) on the return.
- Mortgage interest: $750,000 is the deduction interest cap for mortgage loan balances taken out after Dec. 15, 2017.
- State and Local taxes: $10,000 is the new limit on itemized deductions.
- Retirement savings: The contribution limit to certain retirement plans, including 401(k), has increased by $500 to $18,500.
- Charitable contributions: For contributions made in tax years after 2017, the 50% limitation for cash contributions to public charities and certain private foundations is increased to 60%. Contributions above 60% generally can be carried forward to be deducted over five years.
- Estate and gift tax: For estates of decedents dying and gifts made after 2017, TCJA doubles the base exemption amount to $10 million.
- 529 Plan enhancements: Annual distributions up to $10,000 are now permitted for elementary and secondary education tuitions. This cap does not apply to withdrawals for college tuitions.
- Timing: Most of the new law changes for individual taxpayers are considered temporary and are scheduled to expire in 2026. While a lot can change between 2026, and we look forward to remaining your expert tax advisers.
Business Owners: Did you know?
- Corporate tax rate reduction: TCJA lowers the corporate tax rate to a flat 21%.
- Individual owner deductions: A new deduction is available for business income. An individual may deduct 20% of qualified business income along with partnerships, S corporations or sole proprietorships Schedule C.
- Asset purchases: There are now enhanced write-offs for business asset purchases including 100% bonus depreciation for many assets.
- Like-kind exchanges: Tax-deferred like-kind exchanges are limited to real property not held primarily for sale.
- Paid-leave credit: Businesses that offer paid family or medical leave receive a new credit generally equal to 12.5%.
- Limited entertainment deductions: Most qualified meals are still 50% deductible, but entertainment-related expenses are not.
While these updates may apply to a majority of our clients, we understand that every return is unique. We look forward to the opportunity to service your 2018 tax return needs and to discuss any specific questions you may have. As always, it’s our goal to work with you in minimizing your tax implications and maximizing your returns.
Please call us to schedule a consultation to review your personal or business tax needs. To reach our trusted tax advisers and consultants, call 412-271-1060. To learn more about us, visit https://lodovicotaxpros.com/about/company-overview/.