2018 Tax Cuts and Jobs Act Summary

2018 Tax Cuts and Jobs Act Summary

Provided by: Monica J. Sedillo, CPA

The Tax Cuts and Jobs Act was signed into law on December 22^nd.  Here is a summary of the tax law changes regarding Individual Tax Returns, which are effective with tax years beginning January 1, 2018.

Individuals

1. New Income Tax Brackets
1. Married Filing Jointly

                                                               i.      10% Not over $19,050

                                                             ii.      12% $19,050 - $77,400

                                                           iii.      22% $77,400 - $165,000

                                                           iv.      24% $165,000 - $315,000

                                                             v.      32% $315,000 - $400,000

                                                           vi.      35% $400,000 - $600,000

                                                          vii.      37% Over $600,000

2. Single

                                                               i.      10% Not over $9,525

                                                             ii.      12% $9,525 - $38,700

                                                           iii.      22% $38,700 - $82,500

                                                           iv.      24% $82,500 - $157,500

                                                             v.      32% $157,500 - $200,000

                                                           vi.      35% $200,000 - $500,000

                                                          vii.      37% Over $500,000

3. Head of Household

                                                               i.      10% Not over $13,600

                                                             ii.      12% $13,600 - $51,800

                                                           iii.      22% $51,800 - $82,500

                                                           iv.      24% $82,500 - $157,500

                                                             v.      32% $157,500 - $200,000

                                                           vi.      35% $200,000 - $500,000

                                                          vii.      37% Over $500,000

4. Married Filing Separately

                                                               i.      10% Not over $9,525

                                                             ii.      12% $9,525 - $38,700

                                                           iii.      22% $38,700 - $82,500

                                                           iv.      24% $82,500 - $157,500

                                                             v.      32% $157,500 - $200,000

                                                           vi.      35% $200,000 - $300,000

                                                          vii.      37% Over $300,000

2. Standard Deduction Increased
1. Single $6,500 - $12,000
2. Married Filing Separately $6,500 - $12,000
3. Head of Household $9,550 - $18,000
4. Married Filing Jointly $13,000 - $24,000
3. Personal Exemptions Suspended
4. Capital Gains Rates Set at 0%, 15% and 20%
5. New Deduction for Pass-through Entities (i.e. S-Corporation and Partnership Income)
1. 20% deduction (with limitations)

                                                               i.      50% of W-2 wages, or

                                                             ii.      25% of W-2 wages paid plus 2.5% of the unadjusted basis of “qualified property”.

                                                           iii.      Phases out beginning at AGI of $315,000 for MFJ, $157,500 for others

6. Child Tax Credit Increased
1. Increased to $2,000 per Child
2. Phase Out increased to AGI of $400,000 MFJ and $200,000 for all others
3. $500 nonrefundable credit provided for certain non-child dependents
4. Up to $1400 per qualifying child is refundable
7. State, local and foreign property taxes (including sales tax) are only deductible by businesses.
8. Miscellaneous Itemized Deductions Suspended (i.e. Tax Preparer Fee)
9. Limitation on total Itemized Deductions Suspended
10. Threshold for deducting Medial Expenses is reduced from 10% of AGI to 7.5% of AGI.
11. Individual Shared Responsibility Payment (Obamacare Penalty) has been repealed.
12. The Act leaves intact the 3.8% net investment income tax and the 0.9% additional Medicare tax, both enacted by Obamacare.
13. Alternative Minimum Tax Exemption Increased
1. For joint returns and surviving spouses, $109,400.
2. For single taxpayers, $70,300.
3. For married filing separately, $54,700.
14. Expanded Use of 529 Account Funds - “Qualified higher education expenses” include tuition at an elementary or secondary public, private, or religious school.

This is just a summary, and there are more changes that may or may not directly affect you.  There will be clarifications coming from the IRS on many of the changes as the year continues.  Please feel free to contact your personal CPA with questions, clarification, or validation.

Thanks to our personal accountant for supplying this valuable summary!  If you do not have a CPA, or looking for a change, I highly recommend Monica - she has been our CPA for many years.  She can be reached at:

Monica J. Sedillo, CPA

P.O. Box 3211

Lake Jackson, TX  77566

Phone:  (979) 533-7760

Fax (979) 234-0523

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