Looking Forward To TY2018 Anticipating New Legislation Impact

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Presentation transcript:

Looking Forward To TY2018 Anticipating New Legislation Impact CA-2 Instructor Workshop, December 2017

Two Perspectives Preparing clients for what to expect in TY18 Actions that can be taken before the end of 2017

Disclaimer Legislation Is Incomplete But close agreement on many issues Focusing on Tax-Aide clientele impact Many other changes affecting higher incomes My impression is that on average our clients will be relatively unaffected One analysis predicts 10% lower tax for those earning under $50k Individually there will be bigger impacts

Key Elements for our Clientele Standard Deduction Doubled Single - $12,000 MFJ - $24,000 Complete elimination of some Itemized Deductions Other factors that impact taxpayers selectively

Higher Standard Deduction means many will no longer itemize West Berkeley Library (Average AGI $27k) 26 taxpayers (11%) itemized in 2016 3 would itemize in 2018 under new rules Even if still itemizing, the value of deductions is reduced due to higher threshold

How can we prepare clients? 1 Dependent under age 17 must have SSN to be eligible for ~$1,600 Child Tax Credit Children with ITINS not eligible Dependents over age 16 won’t be as valuable $300 tax credit rather than $4,050 income exemption Elimination of some Adjustments to Income Educators Expense Student Loan Interest Tuition and Fees Alimony Paid (Alimony received no longer taxable)

How can we prepare clients? 2 Elimination of Some Itemized Deductions Medical Expenses Including Nursing Home care State and Local Taxes Income, Sales, Personal Property Property Tax deduction is up in the air Employee Expenses IRS/FTB considers these as greatly abused Older clients tend to have low property tax and mortgage interest Therefore even less likely to itemize

How can we prepare clients? 3 Elimination of Credits Lifetime Learning Credit Students attending college less than half time will get no tax benefit AOTC extended one year, but with reduced benefit and only if at least half-time student Can still take as business expense Elderly and Disabled Credit

How can we prepare clients? 4 Newly taxable income Qualified Tuition Reduction Great concern to graduate students who often get these for $20k-$40k US Savings Bond Interest when used for education expenses

How can we prepare clients? 5 Miscellaneous Items Exclusion on sale of principal residence Must own and live in 5 of 8 prior years Can utilize only once every five years IRA rollover period extended from 60 days to the tax filing deadline (April 15) IRA/Roth IRA recharacterization no longer permissible Conversions still permitted

The Wild Cards - House and Senate Differences Deductibility of Property Taxes None? Some? All? Eliminating the Health Coverage Mandate No SRP! NTTC – Dallas 2014

How can we prepare ourselves? Assumes not subject to AMT Before the end of 2017… Move itemized deductions into TY17 if possible Higher Standard Deduction threshold will reduce value of itemized deductions Some will disappear completely next year If not eligible for AOTC, pay college tuition/fees Cash Savings Bonds to be used for Education

QUESTIONS or COMMENTS?