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Tax Cut and Jobs Act Checklist for Individual tax Payers

Accounting Today, the leading publication for the account industry, published a checklist last month for individual taxpayers on changes to the tax law due to the Tax Cuts and Jobs Act. We thought it would be helpful to share this checklist with you. We suggest you review these changes and how they may impact you with your tax professional. If you do not have a tax professional, we work with many and can assist you in finding one.

Some of the changes included on the checklist for individuals are: 

  • Standard vs. itemized deductions- The standard deduction increased in 2018 for all filers. Due to the increase in the standard deduction and reduced usage of itemized deductions, you may want to consider filing a new Form W-4 so that your withholding is reflective of your actual tax liability under these new rules.

 

  • Medical expense deduction- The threshold for the medical expense deduction is lowered to 7.5% of adjusted gross income (AGI) for regular tax and Alternative Minimum Tax purposes. It reverts back to 10% in 2019.

 

  • The SALT cap- The state and local tax deduction is capped at $10,000. This includes both state income or sales taxes and property taxes. Some states have passed legislation intended to provide a workaround, but that may be challenged by the IRS.

 

  • Casualty loss deduction- There is no casualty loss deduction unless for a federally declared disaster. The taxpayer is required to include the FEMA number and the location of property when claiming the loss deduction.

 

  • Charitable contributions- The deduction limit is increased to 60% of AGI. There is no deduction if the contribution secures athletic event seating rights. Taxpayers need proof of any contribution of $250 or more, even if the charity has reported the contribution to the IRS.

 

  • Mortgage interest deduction- Any mortgage modification that included cash out, even if just for closing costs - may result in the loss of the grandfathered $1 million debt limit and become a $750,000 debt limit. No home equity interest deduction can be claimed unless the taxpayer can document the expenses to buy, build or improve the home.

 

  • Miscellaneous itemized deductions- The deduction for miscellaneous itemized deductions subject to the 2% of AGI floor was repealed through 2025, including unreimbursed employee business expenses, investment expenses, tax preparation fees, and hobby expenses.

 

  • 20% deduction for owners of pass-through businesses- There is a need to determine qualified business income, and taxpayers may also need to determine if theirs is a specified service trade or business, if there are W-2 wages, and calculate the unadjusted basis of qualified property immediately after acquisition. 

 

  • Moving expenses- The deduction and exclusion are eliminated for everyone except members of the Armed Forces.

 

  • The Kiddie Tax- Children are now taxed at the estate and trust tax rates, rather than the parent's tax rate.

 

  • The Alternative Minimum Tax (AMT)- The increase in the AMT exclusion amounts and lower regular tax rates may mean that fewer middle-income taxpayers will be caught by the AMT, but higher-income taxpayers will be caught.

 

  • Carried interests- There is a new three-year holding period for carried interests to obtain long-term capital gain treatment.

 

  • The Affordable Care Act- The individual mandate expires for 2019.

 

Old (2017) versus New 2018 Individual Tax bracketsTax

Single Filer

OLD RATES - 2017

NEW RATES- Tax Cuts and Jobs Act

10%

$0-$9,525

10%

$0-$9,525

15%

$9,525-$38,700

12%

$9,525-$38,700

25%

$38,700-$93,700

22%

$38,700-$82,500

28%

$93,700-$195,450

24%

$82,500-$157,500

33%

$195,450-$424,950

32%

$157,500-$200,000

35%

$424,950-$426,700

35%

$200,000-$500,000

39.6%

$426,700+

37%

$500,000+

Table 1. Tax Brackets for Ordinary Income Under Current Law and the Tax Cuts and Jobs Act (2018 Tax Year)


Married Filing Jointly

OLD RATES - 2017

NEW RATES- Tax Cuts and Jobs Act

Note: The Head of Household filing status is retained, with a separate bracket schedule.

10%

$0-$19,050

10%

$0-$19,050

15%

$19,050-$77,400

12%

$19,050-$77,400

25%

$77,400-$156,150

22%

$77,400-$165,000

28%

$156,150-$237,950

24%

$165,000-$315,000

33%

$237,950-$424,950

32%

$315,000-$400,000

35%

$424,950-$480,050

35%

$400,000-$600,000

39.60%

$480,050+

37%

$600,000+

Table 2. Tax Brackets for Ordinary Income Under Current Law and the Tax Cuts and Jobs Act (2018 Tax Year)