529 College Savings Plans:
Old Law: 529 plan savings could only be used for qualified higher education expenses.
New Law: Tax benefits are now extended to eligible education expenses for an elementary, secondary, public, private or religious school. The new rules allow you to withdraw up to $10,000 a year per student for education costs.
Old Law: Alimony is deductible to the payer and included in the income of the recipient.
New Law: Alimony will not be deductible to the payer and is not includable in the income of the receiver on any divorce agreement signed after January 1, 2019.
Child Tax Credit:
Old Law: The current child tax credit is $1,000 for each dependent child under the age of 17. Phase-out thresholds start at $75,000 for single and heads of households, and $110,000 for married taxpayers.
New Law: The tax credit doubles to $2000 per qualifying child. The phase-out thresholds increase to $200,000 for singles and heads of households, and $400,000 for married taxpayers. Up to $1400 of the credit becomes a refundable credit meaning that even if the taxpayer owes no tax, a credit of up to $1400 can be refunded.
Old Law: The 40% estate tax rate applies to only the portion of an estate valued above $5.59 million per individual or $11.18 million per married couple.
New Law: The new tax law doubles these exemptions to $11.18 for the individual and $22.4 million for a married couple. These exemptions are lifetime exemptions, meaning that once the threshold is met, all additional inherited amounts from any source will be taxed at the 40% rate.
Moving Expenses are no longer deductible except for expenses related to moves by members of the military.
Miscellaneous Tax Deductions:
The following expenses are no longer deductible:
1. Tax preparation expenses
2. Unreimbursed Business Expenses
3. Investment Expenses
4. Personal Casualty or Theft Losses (unless the loss occurred during a federally declared disaster)
5. Safe Deposit Boxes
6. Union Dues
State, Local, Property, and Sales Tax Deduction:
For those individuals still itemizing deductions, they will now be limited to a combined $10,000 for tax deductions on Schedule A
Pass Through Entities
Pass-through businesses are generally small businesses that don’t pay tax at the corporate level. Instead, the owners report the income on their personal returns and are taxed at their owner’s personal rates. Some common types of businesses are partnerships, LLCs, S corporations and sole proprietorships. Effective January 1, 2018 pass-through business owners can deduct up to 20% of their qualified business income up to $315,000.
Home Mortgage Deduction
Mortgage interest deduction will now only be allowed on mortgages on personal residences and/or second homes up to $750,000 total. The previous limit was up to $1 million. This limit applies only on mortgage loans completed after January 1, 2018.
Home equity loan interest (HELOCs) is no longer deductible as of January 1, 2018, even if the loan was made prior to this date.
Meals and Entertainment Deduction
The 50% deduction on business meals remains in effect, however, the deduction for entertainment expenses has been repealed. No allowance for entertainment expenses exists after December of 2017.
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