1. New Legislation - Individuals Chapter 1 pp. 1-21
2018 National Income
TAX Workbook™

2. Tax Cuts and Jobs Act of 2017 (TCJA) pp. 2-4
IRS dedicated page for new law
2018 Tax Rate Schedules (pp. 2-3)
After 2018, adjusted for inflation
Marriage penalty eliminated through 32% bracket
Remains for 35% and 37% brackets

3. p. 4 Children with Unearned Income
For tax years 2018 to 2025
Parents’ rates no longer a concern
Apply ordinary & capital gains rates of trusts/estates to net unearned income
Earned income single rate

4. p. 4 Capital Gains Tax Rates
25% & 28% rates remain (1250, coll.)
Rates for adjusted net capital gain:
Filing Status 0%
15%
20%
MFJ/SS
77,200
479,000
> 479,000
MFS
38,600
239,500
> 239,500
H of H
51,700
452,400
> 452,400
Single
425,800
> 425,800
Estate/trust
2,600
12,700
> 12,700

5. p. 4 Inflation Adjustments
Based on chained CPI-U (C-CPI-U)
Measure of average price changes
Accounts for buyer’s ability to change consumption due to price changes
Slower growing method than CPI-U

6. p. 5 Child Tax Credit ( )
$2,000 per qualifying child with SSN issued prior to due date of return
Refundable to extent of lesser of: $1,400 or 15% earned inc. > $2,500
Phase out start (not indexed):
$400,000 AGI (MFJ)
$200,000 AGI (MFS, HoH, Single)

7. p. 5 Child Tax Credit (2018-2025) Partial Credit - $500
Dependent as defined in § 152 other than a qualifying child
Not refundable
No credit if dependent is resident of Canada/Mexico & not US citizen/nat’l

8. pp. 5-6 Other TCJA Changes 2018-2025
Saver’s credit for ABLE contributions
By designated beneficiary (chap. 5)
AMT for Individuals
Exemption: $70,300 ($109,400 MFJ)
Phaseout: $500,000 ($1M MFJ)
No changes for estates or trusts

9. p. 6 Other TCJA changes Medical – 2017 & 2018: 7.5% AGI limit
AMT and regular tax
Alimony - No deduction, no income
Agreements executed > 2018
Agreemts modified > 2018 if states so
Child support rules unchanged

10. p. 6 Other TCJA Changes 2018-2025 Standard deductions doubled
MFJ & Surviving Spouse $24,000
Head of Household $18,000
Single & MFS $12,000
Additional for elderly or blind:
$1,300 MFJ (each), $1,600 others

11. pp. 6-7 Other TCJA Changes 2018-2025
2% miscellaneous suspended
2106 employee business expenses
Tax prep fees
Investment expenses
§ 183 hobby expenses
If not subject to 2%, deductions remain

12. p. 7 Relief for 2016 Disaster Areas
Qualified 2016 disaster distribution
Eligible retirement plan
After 1/1/16 and before 1/1/18
Principal place of abode in disaster
TP sustained economic loss
No 10% penalty
Distributions up to $100,000

13. pp. 7-8 Relief for 2016 Disaster Areas
May repay distribution within 3 years to a plan to which rollover allowed
Treated as eligible rollover
Income reported ratably over 3 years
TP may elect out
If repay w/in 3 years, amend for $ taxed or not report remaining $

14. pp. 8-9 Other TCJA Changes Itemized limitation suspended (2018-25)
Insurance transfers after 2017
Reportable policy sale
Direct or indirect acquisition
No family, business, or financial relationship to insured
Reporting required: purchase/death

15. p. 9 Student Loan Provisions 2018-2025
Discharge not taxable if
Discharged because of death or disability of student and
Discharged by qualified entity (p. 9)

16. pp TCJA Suspensions
Exclusion for qualified bicycle commuting reimbursement
Exclusion for qualified moving reimbursemt
Exception: US Armed Forces - military order & permanent station change
Deduction for personal exemption
Dependent determination still applicable for other tax law provisions

17. pp. 10-12 Effect of Exemption Deduction Change
Withholding allowances changed
W/h’g tables updated for use by 2/15/18
Designed to work with existing W-4’s
IRS withholding tax calculator for EE’s
Levy exemption $4,150/dependent
No info from TP => MFS with no dep.
Filing requirement based on standard ded.

18. pp. 12-13 Home Mortgage Interest 2018-2025
Home equity loan interest not deductible
Except: loan used to buy, build, or substantially improve qualifying residence securing the loan
Acquisition debt
$750,000 limit (MFS $375,000)
Loan ≤ 12/15/17 - $1M limit ($500,000)
Reduces limit for post 2017 debt

19. p. 13 Home Mortgage Interest 2018-2025
Ex Interest Deductible
$500,000 to buy, $250,000 equity to improve – both secured by home
Ex Interest Deductible
$500,000 to buy main home, $250,000 to buy vacation home – secured by homes
If equity loan on main home to buy vacation home, interest not deductible

20. pp. 13-14 Home Mortgage Interest 2018-2025
Ex 1.3
$500,000 to purchase, secured by home
$500,000 to purchase 2nd home – secured by home
Interest deductible only on loan total of $750,000

21. p. 14 Limit on State and Local Taxes
No deduction for foreign real property tax
$10,000 ($5,000 MFS) limit to total of:
State & local property taxes
State, local and foreign income tax, war profits tax, excess profits tax
General sales tax
Limit N/A if tax is T or B or §212 expense

22. p. 14 2017 Prepayment of Taxes Income tax: Not deductible
Property tax: Deductible if assessed
Ex 1.4
Assessed 7/1/17, billed 9/30/17 payable in 2 installments – prepayment deductible
Ex. 1.5
Assessment to be 7/1/2018
Payment in 2017 not deductible in 2017

23. p. 15 Personal Casualty Loss 2016 & 2017
Net disaster loss subject - $500/casualty floor & no 10% AGI reduction
Can claim in addition to standard ded.
Net disaster loss = excess of qualified disaster-related personal casualty losses over personal casualty gains
Qualified disaster loss = loss due to events in federally declared disaster area

24. p. 15 Personal Casualty Loss 2018-2025
Casualty loss deduction only to extent attributable to federally declared disaster
Other personal casualty losses reduce personal casualty gains (but only to -0-)
Net other casualty losses/gains before applying federally declared disaster loss
Subject to $100 floor and 10% of AGI

25. p. 16 Wagering Losses 2018-2025 Losses remain limited to winnings
Losses from wagering =
Cost of wagers +
Other expenses incurred in connection with gambling activity
(e.g. traveling to/from casino)

26. p. 16 Charitable Deductions 2018-2025
Cash to 50% organizations
Subject to 60% of AGI limit
5-year carryover for excess over 60%
Cash under 60% limit not considered in determining allowable 50% contributions
30% & 50% limits reduced by cash allow’d

27. p. 17 Charitable Deductions – After 12/31/17
Contributions for rights to athletic tickets
Nondeductible
Repeal of exception to substantiation
Return filed by recipient no longer can satisfy contemporaneous written acknowledgment for $250 or more

28. Itemized Deductions – Draft Sch A Medical and Taxes

29. Itemized Deductions – Draft Sch A Interest and Charitable Contributions

30. Itemized Deductions – Draft Sch A Casualty and Other Deductions

31. p. 17 Other TCJA Changes Moving Exp. Ded. Suspended (2018-25)
Exception for US Armed Forces: Military order & permanent station change
Plan Loan Offset Rollover Period (> 2017)
Offset = distribution if plan terminated or loan repayment failure due to severance
From 60 days to due date + extension

32. pp. 17-18 Recharacterizations - IRA
IRA conversion to Roth IRA
2017 – recharacterize by 10/15/18
After 2017 – cannot recharacterize
No change to basic conversion rules
Recharacterization of other contributions still allowed by due date of return

33. pp. 18-19 ABLE and Section 529 Accounts
Contributions to ABLE ( )
Amount equal to gift tax exclusion +
Contribution by beneficiary = lesser of:
Beneficiary’s compensation or
Federal poverty line for H/H of one for preceding year
#2 only if no contribution by beneficiary to 403(b), 457(b), or defined contribution plan

34. p. 19 Rollovers – 529 to ABLE Account
Distributions > 12/22/17 & < 1/1/2026
Can be rolled from 529 to ABLE
ABLE must be owned by designated beneficiary or member of family (p. 19)
Complete within 60 days of distribution
Rolled amounts count towards ABLE limit
Amount > limit taxed as in § 72

35. p. 19 Section 529 Accounts
For distributions after 2017, qualified higher education expenses include K-12 tuition
Public, private, religious schools
Cannot exceed $10,000/year/individual
Excess distributions subject to tax

36. p. 19 Other TCJA Changes Estate and Gift Tax Exemption (2018-2025)
Increased to $11,180,000 for 2018
No ACA Individual Penalty after 2018
(Penalty for employers > 50 not affected)
Time Extension to Contest Wrongful Levy
9 months to 2 years
Applies to those w/in 9 12/22/17

37. p. 20 Other TCJA Changes Due Diligence for determining HoH Status
Tax years beginning after 12/31/2017
Extension of § 6695(g)
Penalty of $500 for each failure
Indexed: $520 for 2018

38. Questions?