American Tax Payers

An individual may claim a personal exemption of $4,050 for each person he or she claims as a dependent on his or her tax return.

Exemption phases out when AGI exceeds:

• $313,800 for Married filing Joint
• $287,650 for Head of Household
• $261,500 for Single
• $156,900 for Married filing Separate

Apparently eliminated, but technically included in the increased standard deduction.

• Filing Status – 2017 standard deduction
• Married filing jointly – $12,700
• Married filing separately – $6,350
• Head of household – $9,350
• Single – $6,350

• Filing Status – 2018 standard deduction
• Married filing jointly – $24,000
• Married filing separately – $12,000
• Head of household – $18,000
• Single – $12,000
• Indexed for inflation each year.
• Lesser standard deduction if claimed as a dependent If an individual is claimed as a dependency exemption to another taxpayer, then that individual’s standard deduction may not exceed the greater of $1,050 in 2018 or the amount of the individual’s earned income plus $350, up to a limit of the standard-deduction amount.

An average family size; Husband & Wife with two children living in a rental property. In 2017 were able to take Standard Deductions $6,350 x 2 = $12,700 and Exceptions $4,050 x 4 $16,200. Total $28,900.

Now you’ll take $24,000 standard deduction. Your taxable income will slightly high, but tax rate is slightly lower depends on your income.

• An individual may generally deduct qualifying mortgage interest for purchases of up to $1,000,000 plus an additional $100,000 for home equity debt.
• $1,000,000 cap applies to a mortgage on your primary residence plus one other home.

• New mortgages will be capped at $750,000 for purposes of the home mortgage interest deduction.
• For mortgages taken prior to December 15, 2017, the limit will remain at $1,000,000.
• The deduction for interest on home equity debt will be eliminated beginning in 2018, but it will return in 2026 – unless the loan is used to “buy, build or substantially improve” the home that secures the loan.

An individual may claim the child tax credit of up to $1,000 for each qualifying child he or she supports

Phase-out when MAGI exceeds:

• $110,000 for Married filing jointly
• $75,000 for Single

• An individual may claim the child tax credit of up to $2,000 for each qualifying child he or she supports, with up to $1,400 as a refundable credit and additional child tax credit.
• A $500 non-refundable credit is available for certain non-child dependents and child without valid social security number.
• Taxpayers cannot claim the credit for themselves or their spouse.

Phase-out when MAGI exceeds:

• $400,000 for Married filing jointly
• $200,000 for all other taxpayers

An individual may generally deduct either:

• State, local, and foreign income taxes paid during the year
• Elect to claim state and local general sales taxes as an itemized deduction in lieu of state and local income taxes

• An individual may deduct up to $10,000 if MFJ ($5,000 for MFS) in a combination of property, sales tax, or state and local income tax.
• But people who are rending portion of their personal property, they still can deduct the portion of their property as they have been doing in prior year using Schedule E.

For 2017, the threshold on medical expense deductions is reduced to 7.5% for all taxpayers.

• For 2018, the threshold on medical expense deductions remains at 7.5% of AGI for all taxpayers
• Reverts to 10% of AGI for all taxpayers after 2018
• Caution: If you are using itemized deductions, you can deduct medical expenses. With standard deductions you’ll lose medical deductions.

Charitable donations. The percentage limit for charitable cash donations by an individual taxpayer to public charities and certain other organizations to 50% of AGI.

• Charitable donations. The percentage limit for charitable cash donations by an individual taxpayer to public charities and certain other organizations has increased from 50% to 60% of AGI.
• Note: If you use standard deductions you cannot use the Charitable Contribution deductions. Your generosity will not give you tax benefit unless you itemize the deductions.

Special rules applied for payments to college institutions which included the right to purchase tickets at an athletic event. The donation was typically considered 80% deductible.

No charitable deduction would be allowed for any payment to an institution of higher education in exchange for which the payer receives the right to purchase tickets or seating at an athletic event.

Taxpayers were allowed to deduct certain miscellaneous itemized deductions which were not deductible unless they exceeded, in the aggregate, 2% of the taxpayer’s AGI.

• Repealed of all miscellaneous itemized deductions subject to 2% AGI floor, which includes deductions for tax preparation fees.
• Unreimbursed job expenses.
• Investment Expenses.
• Tax preparation fees.
• Fees to fight the IRS.
• Hobby expenses.

Taxpayers could claim a deduction under Code Sec. 217 for moving expenses incurred in connection with starting a new job if the new workplace was at least 50 miles farther from a taxpayer’s former residence than the former place of work.

• No deduction for qualified moving expenses except for members of the Armed Forces on active duty who move pursuant to a military order and incident to a permanent change of station.
• Note: If your employer is generous and reimburse the moving expenses, employee would include that reimbursement into the income and employer can deduct that expense.

Maximum rates of 0%, 15%, and 20%

Same as current law with breakpoints indexed for inflation.

An individual may deduct a loss from fire, storm, shipwreck, or other casualty or from theft. Loss is subject to $100 floor and can only be deducted to the extent the loss exceeds 10% of the taxpayer’s AGI.

Repeals deduction for personal casualty and theft losses unless in the case of a casualty loss suffered in a Presidentially-declared disaster area. God forbid any hurricane in your area.

An individual who makes contributions to a traditional IRA or Roth IRA may later decide to change the characterization of those contributions to the other type of IRA account. Generally, this re-characterization can be made prior to the due date of the taxpayer’s return, including extensions.

Re-characterization provisions repealed

Net unearned income of child above $2,100 is taxed at parents’ tax rates if their rates were higher than child’s tax rate

• Taxable income of child attributable to earned income will be taxed under rates for single individuals.
• Taxable income of child attributable to net unearned income is taxed according to the brackets applicable to trusts and estates.

Income effectively subject to ordinary and capital individual income tax rates

• Non-corporate (C Corp) taxpayer (including trusts and estates) with qualified business income (QBI) from a partnership, S-Corporation, or sole proprietorship may deduct:
• The lesser of:20% of the combined qualified business income amount of the taxpayer
• The greater of:50% of the W-2 wages of such trade or business
• The sum of 25% of the W-2 wages of such trade or business PLUS 2.5% of the unadjusted basis immediately after acquisition of all qualified property (depreciable tangible property only) that is used in the qualified trade or business.
• QBI does not include certain investment items and W-2 wages/ guaranteed payments/payment for services
• Limitations apply to specified service businesses with additional limitations based on W-2 wages with respect to the qualified trade or business as well as the unadjusted basis of qualified property
• Limitations do not apply to individuals with income below certain) thresholds ($315,000 for married filing joint taxpayers and $157,500 for all other filers)

Net operating losses are carried back 2 years and forward 20 years.

• NOLs would be limited to 80% of taxable income.
• Carryback option NO longer available in most cases, but an indefinite carryforward period is allowed, subject to percentage limitation.

Individuals who are not covered by a health plan under (ACA) Affordable Care Act with at least minimum essential coverage were required to pay a shared responsibility payment (penalty)

Beginning January 1, 2019, the individual shared responsibility payment is reduced to $0. The repeal is permanent.