Howard, LLP

Howard Insights: Individual Tax Updates

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Dallas, Texas, January 2018– With the passage of the “Tax Cuts and Jobs Act”, clients are asking how these changes will impact them personally. Below are a few of the items we believe could impact you. The majority of the provisions take effect for tax years starting after December 31, 2017.

Standard deduction:

  • Increased from $13,000 (married filing jointly) to $24,000
  • Increased from $6,500 (single) to $12,000

Personal exemptions are reduced to zero

Charitable contributions:

  • For qualifying contributions made after December 31, 2017, and before January 1, 2026, the 50% limitation (based on taxpayer’s contribution base) for cash contributions to public charities and certain private foundations is increased to 60%
  • Amounts over 60% will generally be carried forward for up to 5 years

IRA recharacterization can no longer be used to unwind a Roth conversion

Child tax credit:

  • Increased to $2,000 per qualifying child (under age 17)
  • Phase-out starting at $400,000 for MFJ
  • Refundable up to $1,400 per qualifying child
  • No credit will be allowed unless the taxpayer provides a valid Social Security Number for the qualifying child

Mortgage and home equity interest:

  • Qualified mortgage interest is limited to $750,000 of indebtedness, mortgages acquired before 12/15/17 will be grandfathered in under prior rules
  • Home equity interest deduction is suspended

Medical expenses for the tax years beginning after December 31, 2016 and ending before January 1, 2019, the threshold on medical deductions is reduced to 7.5% for all taxpayers

Miscellaneous itemized deductions subject to the 2% floor are suspended

Alternative Minimum Tax (AMT):

  • Fewer taxpayers will be subject to AMT
  • Increased exemption amount for individuals

Estate and gift tax increased to $11,200,000 (estimated 2018 amount with inflation adjustment)

529 account funds can be used for tuition at an elementary, secondary public, and private schools up to a $10,000 limit per year

Obamacare individual mandate is repealed starting in 2019

If you have questions about how provisions of the new law will affect you, please consult the Howard team and we will be happy to walk through your specific situation. Howard aims to share valuable insight that can help you prepare for the months ahead on your personal returns, as well as in businesses so we encourage you to visit the news section of our website where we will continue to post updates and announcements.