Still have questions about 2017 Tax Reform?

The new tax bill focuses on changes for tax years beginning January 1, 2018, which means most of the changes affected your 2018 tax returns. However, if you didn’t make adjustments to your withholdings during 2019, you could see additional impacts around your refund or taxes due on April 15, 2020.

• Will my refund be affected by tax changes again this year? If you haven’t already, review your withholdings to make sure your employer or you, if self-employed, are withholding the correct amount to make sure you aren’t surprised come tax time. A new 2020 W-4 form is available. 

• Businesses, including small businesses, are able to expense up to $1M in assets and the list of qualified property includes improvements to rental and business property.

• You can claim any excess qualified medical expenses over 7.5% of your Adjusted Gross Income (AGI) as part of your itemized deductions for the 2017 and 2018 tax years. Beginning in 2019, the floor increases to 10% of AGI for all taxpayers.

There are seven different tax brackets. They are: 10%, 12%, 22%, 24%, 32%, 35% and 37%. Many of the lower tax brackets are wider, allowing for lower taxes at all income levels. Small business owners who are sole proprietors or whose business income is taxed on their individual return are able to deduct 20% of their qualified net income before income taxes are computed.

The standard deduction increased. The standard deduction amounts for 2019 are:

• Single: $12,200 (up from $12,000)

• Married Filing Jointly/Surviving Spouse: $24,400 (up from $24,000)

• Head of Household: $18,350 (up from $18,000)

• Married Filing Separately: $12,200 ($5 if spouse itemizes deductions) (up from $12,000)

• Age 65 or older, blind, or disabled: Add $1,300 to your standard deduction ($1,650 for unmarried taxpayers)

• Personal and dependent exemptions are suspended though 2025. However, there have been adjustments to the Child Tax Credits and the standard deduction to help offset the change.

Itemized deductions are still available, but only the following, and there are new limits or thresholds:

• Mortgage interest paid on an original loan for up to $750,000. Interest paid on a second mortgage or equity line may be deductible as long as it is for home improvements and, combined with the remaining original principal, does not exceed the original loan amount.

• The medical expenses floor, or amount subtracted from the total expenses before deduction, was reduced to 7.5% of Adjusted Gross Income (AGI) for all taxpayers in 2017 and 2018 but increases to 10% in 2019.

• Charitable contributions – the limit is 60% of AGI. Any charitable contributions over this amount must be carried forward and added to the next year.

• Regular Casualty and Theft losses are not allowed. However, taxpayers in Federally Declared Disaster Areas may claim their losses.

The Child Tax Credit and the Additional Child Tax Credit were increased. The total Child Tax Credit for each qualifying child under age 17 is $2,000 per child, in addition up to $1,400 of the credit for each child is refundable. The credit is available on incomes up to $400,000 if filing a joint return, and $200,000 for all others. There is also a $500, nonrefundable credit for dependents who do not qualify for the Child Tax Credits. The changes to the credit can mean potentially less taxes and a bigger refund for middle-income taxpayers.

As of January 1, 2019, there is no penalty for not having health insurance.

There are no personal or dependent exemptions.

The AMT has an exemption of $111,700 if you are Married Filing Jointly (up from $109,400), $71,700 for Head of Household and Single (up from $70,300), and $55,870 if you are Married Filing Separately (up from $54,700). The exemption phase-out threshold is increased to $1,020,600 million for MFJ taxpayers and $510,300 for all others.

Basically, deduct 20% of business income, and the remainder is taxed at new rates. There is some other great stuff for “immediate expensing” of business assets, and small businesses are big winners!

To keep the cost of the bill within Senate budget rules, all of the changes affecting individuals will expire after 2025. At that time, if no future Congress acts to extend these measures, the individual tax provisions would sunset, and the tax law would revert to its prior state.

• There are no more business expense deductions. If you have been a remote employee who deducted a home office, travel, or other items, you’ve lost a large deduction.

• Annual Inflation Adjustment computation has been changed to a method that will provide a smaller increase each year.

• The Moving Expense Deduction is repealed unless you are an active-duty member of the military.

• Alimony payments from a new court order, or changed one, are no longer deductible by the payer, and they’re no longer considered income for the recipient.

• Kiddie Tax has been simplified and reduced, and is no longer based on the parent’s tax rate.