Takeaways from the list of 2018 Tax changes:

[Lane Kawaoka]

1) Standard deduction and personal exemption combined and seems like everyone is getting more... so its a wash IMHO.

2) Less deductions for those who don't have a business like real estate investments. Sigh... it just gets harder and harder for working professionals.

3) Sorry to those paying Alimony... Yay to more kids though although we all know that's a huge net negative unless you put them to work in the farm

4) Mortgage interest capped, this is to pay for general cuts across the board. Smart investors will find a away to make their home an above the line business expense.

5) 20% pass through on personal return from business yay!

6) Estate tax limits increases... must be a favor for some old poker buddies?

7) Lower corporate tax to hopefully re-patronize companies who ran away from USA.

I went down the following list and updated my personal spreadsheets to calculate my tax liability. You should too... just Don't hand it over to your CPA!

INDIVIDUALS

• Effective Date: 1/1/18.
• Expires 1/1/26.
• Real Estate Taxes on Primary Home plus State & Local Income Taxes Capped at $10,000.
• Standard Deductions:
  • Single: $12,000.
  • Head of Household: $18,000.
  • Married Filing Join: $24,000.
• 2% Itemized Deductions Eliminated:
  • Tax Preparation Fees.
  • Unreimbursed Business Expenses.
  • Continuing Education Expenses.
  • Licensing Fees.
  • Investment Expenses.
• Alimony – Effective 1/1/19 Alimony No Longer a Deduction to Paying Ex-Spouse and No Longer Income to Recipient Ex-Spouse.
• Mortgage Interest Deduction Limited to $750,000 for Primary and Secondary Home New Mortgages Obtained After 12/15/17.
• Home Equity Interest Deduction on $100,000 Only Allowed For Home Improvements.
• Real Estate Tax Deduction for Vacation Homes No Longer Allowed.
• Moving Expense Deduction No Longer Allowed.
• Casualty Loss Deduction No Longer Allowed Except in Presidential Declared Disaster Areas.
• Medical Expense Deductions Adjusted Gross Income Threshold Reduced from 10% to 7.5% But Only For 2018 & 2019.
• Alternative Minimum Tax Exempt Income Thresholds Increased From $54,300 (Single)/$84,500 (Married Filing Joint) to $70,300 (Single)/$109,400 (Married Filing Joint).
• Alternative Minimum Tax Exemption Phaseouts Increased From $120,700 (Single)/$160,900 (Married Filing Joint) to $500,000 (Single)/$1 Million (Married Filing Joint).
  • Note: This means that if your income exceeds the $500,000 or $1 million phaseout amount, you are no longer eligible to exclude $70,300 or $109,400 from Alternative Minimum Tax.
• Child Tax Credit:
  • Increases From $1,000 to $2,000 Per Child, For Children Under Age 17. Also, This Credit is Refundable Up To $1,400 If You Quality (Meaning – You Meet The Low Income Tests).
  • Phaseout Increases From $75,000 (Single)/$110,000 (Married Filing Joint) to $200,000 (Single)/$400,000 (Married Filing Join).
• 529 Plans Change – You Are Now Allowed to Use $10,000 Per Year to Pay For K-12 Education Tuition, Materials and Tutoring.
• Obamacare Penalty is Eliminated Effective 1/1/19.
• Marriage Penalty is Removed From All Tax Brackets.
• Income Tax Brackets Will Now Be Adjusted For Inflation Using a Much Slower Measure Called Chained Consumer Price Index For All Urban Consumers.

PASS THROUGH ENTITIES

• Effective Date: 1/1/18.
• Expires 1/1/26.
• U.S.-Based LLCS, S Corps, Partnerships and Sole Proprietors, Real Estate Investors, Trusts and Estates, REITs and Qualified Cooperatives
• 20% Deduction Allowed On Individual Income Tax Return. This 20% is Applied to Your Share of the Taxable Income From a Pass Through Entity.
• Deduction is Phased Out if Your Income is Too High: Phaseout Begins at $157,500 (Single)/$315,000 (Married Filing Joint).
• Non-Service Businesses Who Exceed The Phaseout Amount Default to This Limitation:
  • 50% x Wages Reported On Pass Through Business or
  • 25% x Wages Reported On Pass Through Business Plus 2.5% x Tax Basis of Depreciable Property.

CORPORATIONS

• Effective 1/1/18
• Permanent – Meaning No Expiration Date.
• 21% Flat Tax Replaces Graduated Tax Brackets.
• Territorial System Replaces World-Wide System
• All Foreign Profits of U.S.-Based Corporations No Longer Taxed Effective 1/1/18.
• Pre-1/1/18 Untaxed Foreign Profits of U.S.-Based Corporations Automatically Subject to Corporate Tax, Even if Those Foreign Earnings Remain Held Oversees. Tax Rates on “Old Foreign Profits”:
  • 8% x Untaxed Foreign Profits Invested in Illiquid Assets Plus
  • 15.5% x Untaxed Foreign Profits Invested in Cash and Cash Equivalents.

ESTATE TAX

• Estate Exemption Increased From $5,490,000 (Single)/$10,980,000 (Married Couples) to $11,000,000 (Single)/$22,000,000 (Married Couples), Effective 1/1/18.

OTHER

• 50% Entertainment Deduction No Longer Allowed, Effective 1/1/18.
• Tax-Free Parking/Transit Subsidy No Longer Allowed, Effective 1/1/18.
• 100% Write-Off of Qualified Fixed Assets, effective 1/1/18.