Tax Overhaul – What We Might See in 2018.

An attempt to overhaul the current tax structure is currently taking place in both the House and the Senate. From a tax payers perspective, it is important to note that whatever new tax bill is agreed upon, there will be no effect on the filing of taxes for the next tax season. So I just wanted to let everone know that there is no need to panic as this bill, whatever it turns out to be,  will not affect the tax fillings for the year 2017.

Standard Deductions

The House & Senate versions are almost the same. The Proposals would eliminate:

– Personal & dependent exemption deductions.

– The House version eliminates the Age and blind addons –  the Senate version retains them.

Categories:                                   Proposed              Currently

1) Joint Filers                                $24,400                $12,700

2) Single + 1 Qualifying Child       $18,300                  $9,350

3) Others:                                     $12,200                  $6,350

Standard Deduction Example

Current           Proposed

Single $6,350 + $4,050 (1 exemptions)                $10,400           $12,000

Single + 2 $6,350 + (3 exemptions) (3x$4,050)    $18,500           $12,000

MFJ $12,700 + (2 exemptions) (2x$4,050)           $20,800           $24,000

MFJ + 2 $12,700 + (4 exemptions) (4x$4,050)     $28,900           $24,000

MFJ + 4 $12,700 + (6 exemptions) (6x$4,050)    $37,000            $24,000

Individual Tax Brackets

Proposed:

• House: 12%, 25%, 35% and 39.6%

• Senate:  10%, 12%, 22.5%, 25%, 32.5%, 35%, 38.5%

Currently:

• Seven Tax Brackets  10%, 15%, 25%, 28%, 33%, 35% & 39.6%

House Version

%      S                 HH             MFJ           MFS

12%  45,000       87,500       90,000       45,000

25%  200,000     200,000     260,000     130,000

35%  500,000     500,000     1mil            500,000

39.6%

Senate Version

%     S                 HH             MFJ           MFS

10     9,250        13,600        19,050        9,525

12     38,700      51,800        77,400      38,700

22.5 60,000       60,000      120,000      60,000

25     170,000  170,000      290,000     145,000

32.5 200,000   200,000      390,000     195,000

35     500,000  500,000      1Mil           500,000,

38.5

12% Bracket

A)   Phased Out – House Only

B)    The tax benefit of the 12% bracket is phased out at $6 for Every

$100 AGI exceeds:

1)   $1 Mil for Single Individuals

2)   $1.2 Mil for MFJ

Itemized Deductions

• Medical Expenses

• House – Repealed

• Senate – Retained

• Taxes

• House – $10,000 of Property Tax

• Senate – None

Home Mortgage Interest 

House

•  Debt Limited to $500,000 For New Purchases After 11/2/2017
•  Existing Debt $1 Million
• Limited To Acquisition Debt
• Primary Residence Only

Senate

•  Debt $1 Million
• Limited To Acquisition Debt
• Primary & Secondary Residence Only

Charity

•  Remains a Deduction
• 50% AGI Limit Goes To 60%
• Charity Mileage Rate Inflation Adj –House Only
• 5 Year CO continues

Certain Miscellaneous, Repealed – House & Senate

• Employee Business Expenses
• Tax Preparation Fees
• Casualty Losses

*However, Senate Version allows Disaster Losses

Senate Version Repeals all Tier II

Child & Family Credits

• Increase CTC to $1,600 ($1,650 Senate)
• First $1,000 of CTC refundable.
• Add $300 ($500Senate) nonrefundable credit for other dependents.
• House Only Add $300 nonrefundable credit for Filer & Spouse.
• Senate Only – Retains the EI refundable threshold

Due Diligence

·       Senate Version

1.)  Adds HH Due Diligence

2)   $500 Penalty

Kiddie Tax

•     House Version

1)   Changes the computation

2)   Cuts connection to parent’s return

•     Senate Version

1)   Changes the computation

2)   Cuts connection to parent’s return

3)    Unearned Income taxed at Fiduciary Rates

Education – House Only

• Credits Consolidated.

1)   AOTC – Only One

2)   Extended To 5 Years

3)   5th Year

1)  Only half credit

2) Only $500 Refundable

• Education Loans

1)   Forgiven Because of Death or Disability

2)   No COD Income

• Repealed Benefits

1)   Above the line Deduction

2)   U.S. Savings Bonds Interest

3)   Employer Provided Education Assistance

 

 Alimony • House Only

1)    For Decrees After 2017

2)    Not Deductible To Payer

3)    Not Income To Recipient

 

Moving Expense • House & Senate

1)    Repealed

2)    Employer Reimbursement Taxable

 

 Adoption Credit • House

1)   Original Draft Axed Both the Credit and Tax-Free Reimbursement

2)    Amended to Retain Credit

• Senate – Not Mentioned

 

Archer MSA – House Only

1)    No Further Contributions

2)   Can Rolled Into An HSA

 

Home Sale Exclusion – House Only

1)  Phase Out – $1 or every $ AGI Exceeds

1) $500,000 MFJ

2) $250,000 Single

• Ownership/Use – House & Senate

1)  5 out of 8 Years

 

Employee Fringe Benefits • House Repealed

1)   Achievement Awards

2)   Dependent Care Assistance –2023

3)   Transportation – Transit passes etc.

• Senate Repealed

1)  Bicycle Commuting

 

Credits • House Only

1)   Electric Vehicle – Repealed

2)   Mtg Credit Certificates Repealed

3)   Wind Energy, Geothermal & Fuel Cell Restored along with Solar Thru 2022 – Subject to The Existing Phaseouts

 

 Capital Gains • Essentially Same For House & Senate

1)    0% Below the Old 15% Tax Bracket

2)    $77.3K MFJ $51.7K HH $38.6 Others

3)   15% Below 20% Tax Bracket

4)   $479K MFJ $239 MFS $425 Others

5)   20% On The Balance

 

AMT • Repealed – House & Senate

AMT Tax Credit  House

1)      50% in 2019 thru 2021

2)      Balance in 2022

User | 27/11/2017