The key changes you need to know for the 2018 tax year 2018 Tax Changes The key changes you need to know for the 2018 tax year Created by: Emilee Traylor

Standard Deductions Filing Status Standard Deduction for 2018 Change Single $12,000 $6,350 +$5,650 Married Filing Jointly $24,000 $12,700 +11,300 Married Filing Separately Head of Household $18,000 $9,350 +8,650

Personal Exemption The personal exemption has been eliminated with the tax reform bill.

Tax Brackets Tax Rate Single Married Filing Jointly Married Filing Separately Head of Household 10% Up to $9,525 Up to $19,050 Up to $13,600 12% $9,526 - $38,700 $19,051 - $77,400 $13,601 - $51,800 22% $38,701 - $82,500 $77,401 - $165,000 $$51,801 - $82,500 24% $82,501 - $157,500 $165,001 - $315,000 32% $157,501 - $200,000 $315,001 - $400,000 35% $200,001 - $500,000 $400,001 - $600,000 $200,001 - $300,000 37% $500,001 or more $600,001 or more $300,001 or more

Itemized Deductions Medical and Dental Expenses The floor has been lowered to 7.5% of your AGI. Before the tax reform the floor was at 10%. Example: If your AGI is $40,000 and your medical expenses were $5,000. Assuming you itemized, you can now claim $2,000 as a deduction vs. $1,000 before.

Itemized Deductions Cont. State and Local Taxes All state and local sales, income and property taxes together may not exceed $10,000 ($5,000 for married taxpayers filing separately). State, local, and foreign property taxes, and sales taxes which are deductible on Schedule C, Schedule E, or Schedule F are not capped.

Itemized Deductions Cont. Home Mortgage Interest The mortgage used to buy, build or improve your home must be $750,000 or less to qualify for this deduction. For mortgages taken out before 12/15/2017 the limit is $1 mil.

Itemized Deductions Cont. Charitable Contributions The limit for cash donations to a public charity increased from 50% to 60%. Taxpayers are no longer allowed to deduct payments made to a college in exchange for college athletic event tickets or seating rights. The charitable standard mileage rate remains at 14 centers per mile.

Itemized Deductions Cont. Casualty and Theft losses You can no longer deduct personal casualty and theft losses UNLESS the loss is attributable to a federal disaster as declared by the president.

Itemized Deductions Cont. Job expenses and Miscellaneous Deductions The deductions have been eliminated for tax years 2018 – 2025. This included unreimbursed employee expenses and tax preparation expenses.

Estate Tax The estate exemption doubles to $11.2 million per individual and $22.4 million per couple in 2018

Child Tax Credit The child tax credit has been raised to $2,000 per qualifying child, those under 17. A $500 credit is available for dependents who do not qualify for the $2,000 credit.

Contribution Limit for Retirement Those who participate in retirement plans, such as, 401(k), 403(b) and most 457 plans can now contribute as much as $18,500 this year, a $500 increase from the 2017 limit.

IRA’s Single taxpayers phaseout limit is $63,000 - $73,000 Married couples – the phaseout range varies depending on whether the IRA contributor is covered by a workplace retirement plan. For a spouse who is investing has access to an employer plan, the range is $101,000 - $121,000. For a spouse who is investing does not have a retirement plan but is married to someone who does, the phaseout is $189,000 - $199,000

Roth IRA’s Individuals who are single or file Head of Household the income phaseout is $120,000 - $135,000 For couples filing Married Filing Jointly the income phaseout is $189,000 - $199,000

Education The new tax bill expands the use of funds saved in a 529 college savings plan to include levels of education other than college. Meaning if you have children in private school, or you pay for tutoring for your child in the K-12 grade levels, you can use the money in your account for these expenses.

Obamacare TCJA eliminates the Affordable Care Act penalty beginning in tax year 2019! If you are NOT covered for 2018 you are still expected to pay the penalty!

Alimoney Effective for any divorce or separation agreement as of Jan. 1, 2019, The person making alimony payments does not get to deduct them and the recipient does not claim the payments as income.

Alternative Minimum Tax Under the new law – Married couples filing jointly will be exempt from the AMT starting at $109,400. Exemption starts at $70,300 for all other taxpayers. The exemption phase-out thresholds will rise to $1,000,000 for married couples filing jointly, and $500,000 for all other taxpayers.

Moving Expenses The deduction for moving expenses has been eliminated through 2025.

Business Tax Changes

For Pass through entities can now enjoy a 20% Business Income Deduction So if your business’ taxable income was $100,000, then after the 20% deduction, you only have to pay taxes on $80,000

Corporate Tax Rate was lowered from 35% to 21%

100% Bonus Depreciation This allows you to immediately deduct the depreciation in the first year. Originally you were only allowed to deduct 30% of qualifying personal property used for business purposes, like a computer or a car

Section 179 Deduction raised to $1,000,000

Client Entertainment GONE This used to be 50% deductible along with meals, but as of 2018 you can no longer deduct expenses for football games, concerts, golf, ect.

Meals went from 100% deductible to only 50% When an employer would bring meals into the office or snacks they were able to deduct 100% of the cost. Under the new law they can only deduct 50%

Net Operating losses can only be carried forward Losses also limited to 80% of taxable income

Schedule an Appointment with us today! Click the link below to schedule an Income Tax Planning appointment! We would be glad to help you adjust to all the new changes! Tax Appointment PO Box 348 40644 Hwy 290 Business Waller, TX 77484 Office: 936-372-2661 Fax: 281-254-7879 Gundersons Bookkeeping Webiste "Like" us on Facebook