Miksch & Co CPA, PA has put together the important tax law changes for your 2018 taxes.
Standard Deductions (Itemize if your deductions are greater than these amounts)
2017 2018 2019
Single $6,350 $12,000 $12,200
Joint (Married) 12,700 24,000 24,400
Head of Household (must have a dependent) 9,350 18,000 18,350
Elder/blind-single 1,550 1,600 1,650
Elder/blind-married 1,250 1,300 1,300
Personal Exemptions (Dependents) $4,050 NONE NONE
Auto Mileage Rate $ 0.535 $ 0.545 $0.58
Social Security/IRA Contributions
Social Security Allowable earnings: 2019 2018
62-full retirement $17,640/$1,470 $17,040/$1,420
Full retirement age $46,920/$3,910 $45,360/$3,780
IRA Contribution (age >50) $6,000/$7000 $5,500/$6,500(over 50)
Roth IRA Income Limits $122,000/$193,000 $120,000/$189,000
401K $19,000/$25,000 $18,500/$24,500(over 50)
Estate & Gift Tax 2019 2018
Estate tax applies/top rate $11,400,000 (40%) $11,180,000 (40%)
Annual gift tax exclusion $15,000 $15,000
The 2018 Form 1040 looks a lot different this year. It’s now post card size but don’t get too excited because it’s actually gotten more complex. The current form has 23 lines instead of 79. The front is basically just the taxpayer information while the back contains the tax calculations. Form 1040A and 1040EZ were discontinued. If your tax return has items that weren’t on those forms, the IRS has developed 6 new schedules to report your income, tax credits and other items. So much for tax simplification.
FICA Wage base has increased from $128,700 to $132,900 for 2019
ACA Penalties: 2016-2018 higher of $695 or 2.5% of income. 2019 NO MORE PENALTIES.
There are so many changes in the 2018 tax law that I’ll only cover the changes that affect most of my clients. If you have questions about how other changes affect you, please call to make an appointment.
Children under 19 (24 if college students) will have to file a tax return if they have any unearned income (interest, dividends, & capital gains). They are now being taxed at the higher trust & estate tax return rates. Earned income (wages or self-employed income) is taxed at the single rate.
No more deductions for Alimony paid or income on Alimony received for divorces or settlement agreements after December 31, 2018.
All miscellaneous itemized deductions are no longer deductible. This includes your investment fees, safe deposit box, employee business expenses, union dues, tax prep fees not on a Schedule C or E, etc.
Entertainment expenses are NOT tax deductible beginning in 2018. Meals are still 50% deductible.
NO MORE PERSONAL EXEMPTIONS. Tax credits have been increased to $2,000 per client <17 and $500 per dependent over 17 years old. Credits will be phased out with income >$400,000 married and $200,000 all others. Previous phase outs were $110,000/$75,000 so more people will get to take the child/family tax credits in 2018.
No more residential energy tax credits for doors, windows, roofs, etc.
Income from a Schedule K-1, Schedule C, E & F will get a 20% tax deduction. These rules are complicated and cannot be discussed here. Please call me to review your situation if you’re a personal service corporation. There’s a phase out for taxable income < $315,000 married/$157,500 all others.
Mortgage interest will be limited to acquisition debt of $750,000 for mortgages taken out after 12/15/17, ($1 million if grandfathered in). Mortgage interest on equity loans will no longer be tax deductible in 2018. Mortgages on Schedule E are still deductible. Investment interest paid on borrowing for taxable investments are also still deductible on Schedule A.
Mortgage insurance premiums are no longer tax deductible in 2018. Check with your mortgage company if you’ve paid your principal down to see if you can stop paying for MIP coverage. The mortgage rules are very complex, please call if you took out a mortgage or refinanced after 12/15/17.
Moving expenses are no longer deductible except for the military.
Taxes are deductible up to $10,000 in 2018. This includes both sales tax & real estate tax on your residence. Please call and talk to me about taking a home office deduction under an accountable plan to lessen the burden of this if you work from home.
Casualty losses are no longer deductible unless the loss is attributable to a federal declared disaster area. If you withdrew for a 401K for IRMA, you could possibly avoid the 10% penalty.
There are big changes in depreciation expense that cannot be detailed here. Bonus depreciation, Section 179 and class lives all changed effective 9/28/17. You can no longer defer the gain on sale of business equipment & automobiles by trading them in for a newer model.
Net operating losses cannot be carried back 2 years beginning in 2018. Now carry forward for 20 yrs.
The alternative minimum tax was changed for individuals so most taxpayers will not incur this tax anymore. The AMT was eliminated for Corporation for 2018.
Capital gain/dividends are still taxed at 0% if you’re below the 15% tax bracket, 15% for others except 20% for those in the 37% tax bracket. The 3.8% surtax for income >$200K/$250K still apply.
In 2018 you cannot reclassify a Roth IRA that you previously converted back to a traditional IRA.
Medical expenses for 2017 & 2018 have to exceed 7.5% of AGI and increase to 10% beginning 2019.
Section 529 plans can now be used for elementary or secondary schools and not just higher education.