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1. Federal Tax Updates

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1. Federal Tax Updates

The new tax reform was finally approved by Congress on December 22, 2017. On December 22, 2017, the Tax Cuts and Jobs Act was passed by Congress. This new tax act provided reconciliation pursuant to titles II and V of the concurrent resolution on the budget for fiscal year 2018”. This legislation, which the President signed into law on Dec. 22, 2017, is the most sweeping tax reform measure in over 30 years. The new legislation makes fundamental changes to the Internal Revenue Code that will completely change the way individuals and businesses calculate their federal income tax liability, so as to create numerous planning opportunities. The changes affecting individuals include new tax rates and brackets, an increased standard deduction, elimination of personal exemptions, new limits on itemized deductions (state taxes, mortgage interest), and the repeal of the individual mandate under the Affordable Care Act. The changes affecting businesses include a reduction in the corporate tax rate, increased expensing and bonus depreciation, limits on the deduction for business interest, and a new 20% deduction for pass-through business income. The foreign provisions include an exemption from U.S. tax for certain foreign income and the deemed repatriation of off-shore income.

This new tax reform is the new Tax Cuts and Jobs Act (TCJA). This new tax reform was passed to take effect on both individuals and businesses. This new legislature dictates how businesses compute business interest and what business interest limitations exist under the new legislation recently passed on December 22, 2017. This new tax law will also affect the withholding on the transfer of non-publicly traded partnership interests and tax withholding me need adjustment for certain key groups. Furthermore, the new legislation affects the computing of the "transition tax" on the untaxed foreign earnings of foreign subsidiaries of U.S. companies. S corporations are also subject to the extended three year holding period for applicable partnership interests. With the new tax law changes, will come different withholding demands. The interest on home equity loans will still be deductible under the new tax law.

Other items will be affected, such as the procedures for changing the accounting period of foreign corporations owned by U.S. shareholders that are subject to the transition tax under the new Tax Cuts and Jobs Act. Certain 2018 Pension Plan limitations will not be affected by the new tax law of 2017. The new law will not affect tax year 2018 dollar limitations for retirement plans.

Alaska Native Corporations and Alaska Native Settlement Trusts may be able to take advantage of certain benefits that are in place in the new tax law legislation. Certain tax advantages may exist is paying items early before enacting of certain items in the new tax code take effect. One of these items is prepaid real property taxes. Real property taxes may be deductible in 2017 if assessed and paid in 2017.

The new administration campaign tax plan was that the number of tax brackets would reduce from seven to three. Similarly, the House of Representatives’ original tax reform bill contained four brackets. Ultimately, common sense interceded and we are still at the seven-bracket structure. There is just no way, we will ever have a postcard tax return with all these many tax brackets! The tax rates are lower with about 2 % less than with the previous tax brackets but starting at 10%.

 

The marriage penalty is almost gone. What is the marriage penalty? This penalty does not really exist as a specified penalty anywhere but it is widely talked about. Why? The marriage penalty is a concept that takes place with the change is the tax bill after a couple marries. The “marriage penalty” or the higher tax bill is due to the combined income of the couple and as a result of the combined income, the couple is changed to a new tax bracket and thus new tax rate which will usually result in paying more taxes than if the couple remained single.

In a few instances the opposite can be true. Instead of a marriage penalty, the couple could incur a bonus which means that the couple fairs better by filing their tax returns as married filing jointly than when they file their tax returns as single. Thus, the couple will have a gain resulting in a bonus instead of a penalty. Again, these are widely spoken about, but there is not per say a “marriage penalty” or “marriage bonus” and these are merely the result of calculations after applying the different tax brackets at the married rates and at the single rates. Other items also affect couples that would cause a “marriage penalty” such as the ability of the individual to file as head of household when the individual is single and thus would not qualify for this HOH filing status once the individual gets married. Additionally, the individual will no longer qualify for the Earned Income Credit because of the combined income as a married individual.

Remember this, the marriage penalty is not an actual penalty. It is something that happens as a result of the different tax bracket (7 tax brackets). The only thing a taxpayer can do to completely eliminate this penalty or the possibility of the marriage penalty is plan your taxes before marriage. It is a well-known fact that when couples plan to marry, the last thing on their mind is the marriage penalty.

If you earn more, your income tax bracket will be higher and that only makes sense. An individual who is not married is single for tax purposes. A couple who is married is considered one individual for tax purposes and thus their income is taken together as one individual. When the couple gets married, the income will usually increase tremendously unless one of the individuals in the marriage is not working. If the income increases, then the tax bracket and the tax rate also increases. The higher tax as a result of getting married is the marriage penalty. The marriage penalty would be the higher tax and the loss of credits and deductions as a result of the marriage.

What is a capital asset?

Almost everything you own or use for person or investment purposes is a capital asset such as your car, household furnishings and stocks. Stocks or bonds would be items that are considered capital assets which you hold for investments. When you sell these items, the difference is a capital loss or a capital gain. Then, after that, you must determine if your assets are a short-term or a long-term item and then you will apply the tax rate. The capital gains tax rates if you have a gain, of course. If you have a loss, you usually you can deduct up to $3,000 of it. Please note that this amount is $1,500 if you are married filing separately. You have this limit and once you reach the maximum you can deduct for the year, you usually can either carry the excess forward to other years. Anyways, if you held the item for less than a year, this property is considered short-term and thus you would have a short-term capital gain and you held your asset for more than a year, then you asset is considered long-term.

The tax rate on most of these capital gains is usually no more than 15% for most taxpayers. It can even be 0% if you're in the 10% or 15% ordinary income tax brackets. This is your tax bracket for your other income such as your W-2 wages. However, if you exceed certain thresholds, then your capital gains may be taxed at 20%. These thresholds are the thresholds for ordinary income tax bracket that is 39.6%. For example, if you are single and your ordinary income is $418,400 then your tax rate could be 39.6% and thus your net capital gain would be taxed at 20%. Likewise if you are married filing jointly or qualifying widow (er) that threshold is $470,700 and $444,550 for head of household. For married filing separately, this amount is almost half at $235,350.

Other than being at a tax bracket of 39.6% and being taxed at the 20% capital gain rate, there are other situations. Your capital gains may be taxed at rates greater than 15% if

1. The taxable part of the capital gain from selling section 1202 qualified small business stock is taxed at a maximum 28% rate.

2. Net capital gains from selling collectible are taxed as a maximum 28% rate.

3. The portion of any unrecaptured section 1250 gain from selling section 1250 real property is taxed at a maximum 25% rate.

The items discussed above usually apply only to long-term capital gains, but short term capital gains are taxed differently. Notice that net short-term capital gains are taxed as ordinary income. These gains are from property you hold for less than a year.

Income is due as you earn it, so if you know you are going to have to pay capital gains tax, then you should plan accordingly and even make estimated payments.

The new tax provisions in the above mentioned is that the tax rate on most net capital gain is no longer higher than 15% for most taxpayers. That is, unless you go over the thresholds mentioned or you are selling section 1202 qualified small business stock. If you are selling section 1202 qualified small business stock then it is taxed at a maximum 28% rate. Also, if you are selling collectibles your maximum rate is 28%. The portion of any unrecaptured section 1250 gain from selling this section 1250 real property is taxed at a maximum of 25% rate. Other than this, the capital gain is not higher than 15%.

What are these adjustments to income that help you arrive at AGI? A few examples of over the line deduction that help you arrive at AGI are

• Repayment of supplemental unemployment benefits required because of receipt of trade readjustment allowances.
• Forfeiture-of-interest penalties because of premature withdrawals.
• Capital loss deductions up to $3,000.
• IRS contributions.
• Rent and royalty expenses.
• Educator expenses.
• 50% of self-employment tax liability.
• Health savings account (HSA) contributions.
• Health insurance premiums if self-employed.
• Jury duty pay turned over to your employer.
• Performing artist's qualifying expenses.
• Reforestation expenses.
• Reservists' travel costs.
• State and local official expenses.
• Student loan interest
• Self-employed retirement plan contributions for yourself.

These are only a few of the possible deductions that help you arrive at AGI. Adjustments to income are expenses that are applied before any taxes. These reduce your total income. These are the items you enter on your Form 1040 before you apply your standard deduction, itemized or your exemptions. After you calculate adjustments to income you are left with your adjusted gross income.

Adjustments to income are individual retirement arrangement (IRAs), alimony, bad debt deduction, moving expenses, student loan interest deduction, tuition and fees deduction, and the educator expense deduction.

There are two things. The new tax law treatment of alimony payments will apply to payments that are required under divorce or separation instruments that are (1) executed after December 31, 2018 or (2) have been modified after that date and if the modification specifically states that the new tax law now applies. 

The requirements to deducting moving expenses are that your move closely relates to the start of work, you meet the distance test, and that you also meet the time test. If you are a member of the Armed Forces and your move was due to military order and a permanent changer of station, you don't have to satisfy the distance test. If you are in the military and have to move due to military order, you can still take a moving expense deduction on your tax return.

The moving expense deduction suspension is for December 31, 2017 through December 31, 2025. Starting January 1, 2018 and beyond, you will no longer be able to deduct moving expenses on your tax return. Yes, this is another attempt at making your tax return as simple as sending in a postcard.

The Tax Cuts and Jobs Act was passed in December 2017 and has eliminated the moving expense deduction. This deduction elimination is not permanent and may revert after 2025 and may depend on who is in charge at that time. It may come back at that time and at that time it will up to Congress or the individual in charge to eliminate it permanently. This means that if you moved before 2018 you may be able to claim the moving expense deduction and if you move in 2026, you may be able to claim a moving expense deduction.

By the way, many of the tax law changes such as the suspension of the moving expense deduction are temporary and only for the periods of 2018 through 2025. At that time, we will know what will come back and what will stay eliminated.

How do recharacterization work and why it is useful?  A recharacterization allows you to treat a regular contribution made to a Roth IRA or to a traditional IRA as having been made to the other type of IRA. You are only allowed to make a contribution to an IRA to a certain limits and these limits are up $5,500 for 2018 or $6,500 if you are 50 or older. Different rules apply if you contribute to a traditional IRA and if you contribute to a Roth IRA or the tax treatments are different for each kind of IRA.

You recharacterize by telling your trustee of the financial institution holding your IRA to transfer the amount of the contribution plus earnings to a different type of IRA which is either a Roth IRA or a traditional IRA. This is done either in a trustee-to-trustee transfer or to a different type of IRA with the same trustee. This works by making the transfer by the due date for filing your tax return (including extensions) and you treat the contribution as made to the second IRA for that year as if you made it to the second IRA for that year as if you never made it to the first IRA.

Starting January 1, 2018 for tax year 2018, you will not be allowed to do this any longer as dictated with the new Tax Cuts and Jobs Act legislation. Hence, a conversion from a traditional IRA, SEP or SIMPLE to a Roth IRA can no longer be characterized. In addition, the Tax Cuts and Jobs Act also prohibits recharacterizing amounts rolled over to a Roth IRA from other retirement plans such as 401(k) or 403(b) plans. 

However, you have until October 15, 2018 to recharacterize a Roth IRA conversion made in 2017 and this can recharacterized as a contribution to a traditional IRA. As already discussed a Roth IRA conversion made on or after January 1, 2018 cannot be recharacterized.

One thing to note is that you can still recharacterize by rolling out excess contributions to a Roth IRA. Do this if you contribute early in the year to a Roth IRA, but then earn to much over the phase-out limits, thereby disqualifying you from being able to contribute to a Roth IRA for the year. You can undo this contribution without being subject to an excess contribution penalty tax by recharacterizing the contribution to an IRA. You can still do this regardless of the new tax law changes (Hopkins 2018).

It is important to note that the reason people charaterizing from one IRA to another is the fact that these are two different products that are treated differently in the tax code. With a traditional IRA for example, you get a tax deduction up front and taxes are delayed until you withdraw your money when you retire and the idea is that at that time your tax rate will be a lot lower. With Roth IRA, the IRA is funded with post-tax money and with a Roth IRA your tax rate when you retire will be zero. Therefore, recharacterizing an IRA is changing how taxes will apply to the IRA.

But now, the new Tax Cuts and Jobs Act (TCJA) has removed this ability to recharacterize and this could have a major impact on financial planning for many.

Yes, indeed, entertainment expenses are very necessary for your business to succeed. Good news, though. Remember that part of the entertainment expense that is for meals? Well, you can generally take 50% of your business-related meal expenses are allowed as a deduction. You can still entertain your customers, but you pick up the tab for the entertainment part and the IRS will pick up the tab for 50% of the meal part. To be able to deduct 50% of your meals as a business deduction though, the meal expense must be ordinary and necessary in carrying on your trade or business and this expense must still meet the directly related test or the associated test.

Remember though, that these limitations only apply to your relationships with customers and not with your employees. Don't get all confused and start setting your own limits that are not included in the new Tax Cuts and Jobs Act. The expenses that are still deductible, and we mention this only so that you get this ingrained in your head, are expenses for your employees that are for

1. Entertainment, amusement and recreation expenses which you treat as compensation to your employees and of course you must include these in their wages.

2. Entertainment expenses for recreation, social, or similar activities and facilities for employees.

Please note that you cannot call entertainment expenses those expenses that you incur for entertainment goods, services, and facilities which you have for sell to customers. Come on, these are called cost of goods sold.

Also, again, remember that with the entertainment expense elimination as with the other elimination of deductions, that they are only temporary. The elimination is from 2018 through 2025. At that time, in 2025, we will see, how all this works out. Who knows, someone with enough sense will re-establish these provisions that have for such a long time become a part of who we are. In America we can deduct business expenses for entertaining our clients, we can golf and transact business at the same time, we can... Don't worry our America will come back to us, after all this chaos is over, we will be great again!

Section 179 allows taxpayers to immediately expense the cost of qualifying property rather than taking depreciation deductions in yearly increments. The maximum amount that a taxpayer can deduct has been increased with the new Tax Reform. The maximum amount a taxpayer can deduct now in Section 179 deduction for property placed in service after December 31, 2017 has been increased from $520,000 to $1,000,000. Along with this increase there is also a phase-out threshold from $2,070,000 to $2,500,000 for property placed in service after 2017. Once the amount for the total Section 179 property placed in service during the year exceeds the threshold amount, then that is when the phase out occurs and at that point the deduction will be reduced dollar-for-dollar by the excess amount. As with other tax items, the deduction and the phase-out limit amounts will be increased for inflation starting in 2019 and in later years.

Under the new tax law, the qualifying property for Section 179 expensing now also includes certain depreciable tangible property used in connection with lodging and improvements to non-residential real property such as roofs, heating, ventilation, air conditioning, and fire and alarm protection systems.

For many businesses and corporations, this is an excellent tax savings brought about with the new Tax Cuts and Jobs Act.

However, on December 22, 2017, the new tax bill went into effect increasing the deduction for bonus depreciation to 100 percent. This new tax bill will take effect immediately allow businesses to deduct 100% of eligible property placed in service after September 27, 2017, and before January 1, 2023. Some eligible property with longer production periods, the 100 percent bonus depreciation is extended through December 31, 2023. Qualifying property is property that has a depreciable recovery period of 20 years or less. Now, eligible property is expanded to include used property, certain qualified film, television, and live theatrical production equipment. The new tax law excludes property from certain utility property and vehicle dealer property.

It is noteworthy that the rate of bonus depreciation will not always be 100% and it will decrease over the next four years:

80% for property placed in service in 2023

60% for property placed in service in 2024

40% for property placed in service in 2025

20% for property placed in service in 2026

0% for property placed in service after 2026

Bonus depreciation is retroactive beginning with assets purchased after September 27, 2017.

1. $10,000 for the first year a vehicle is placed in service

2. $16,000 for the second year,

3. $9,600 for the third year,

4. $5,760 for each succeeding year until the basis in the vehicle has been recovered.

The amount in 1 through 4 above will change slight to adjust for inflation. 

Farming equipment and machinery placed in service after December 31, 2017 and tax years that end after December 31, 2017, have a 5-year recovery period. Grain bins, cotton gins, fences and other land improvements are excluded from the 5-year useful life. With the new Act, there is no longer a requirement that property use in a farming business be depreciated using the 150% declining balance method. Farming property placed in service after December 31, 2017 and in a tax year ending after December 31, 2017, is depreciated using the 200% declining balance method. The 200% declining method excludes buildings, trees, vines bearing fruits or nuts, and property for which the taxpayer has elected to use either.

Certain assets that can be used for business and for personal use are considered listed property and are subject to limited depreciation deductions. For example, there are limits in place for depreciating passenger vehicles and again because it is considered a personal use item.

Under the new tax law, there is an increase in the annual depreciation limits on passenger autos and leading to annual limits (Section 280F limitation) of

• $10,000 for the 1st year,
• $16,000 for the 2nd year.
• $9,600 for the 3rd year.
• $5,760 for each remaining year in the recovery period.

After this the taxpayer is entitled to deduct $5,760 each year until the auto is fully depreciated.

Each year a passenger auto is depreciated, the deduction is limited to the lesser of

• the Section 280F limitation, or
• the depreciation that would have been computed under Section 168 which is the normal depreciation.

The medical expense deduction is one of the few deductions that will be left to itemize on Schedule A. The new Tax Cuts and Job Act will double the standard deduction to $12,000 for individuals and $24,000 for joint filers and with less it is anticipated that there will less taxpayers who itemize deductions on their tax returns.

After the 2017 and 2018 tax years in which the 7.5 percent medical deduction threshold will be in place, the threshold will revert to the 10 percent which means a lower medical deduction.

The types of eligible expenses remain unchanged. They continue to include

• Expenses for doctor, dentists, chiropractors, psychiatrists, psychologist, podiatrists, and other medical professionals.
• Health insurance premiums
• Premiums for long-term care insurance
• Inpatient alcohol and drug treatment programs
• Wheelchair ramps and other modifications to your home for medical reasons
• Transportation to doctor appoints and visits such as taxi, bus fares and other items such as parking
• Prescription drugs
• Payments for smoking-cessation programs and weight-loss programs that are related to a specific disease diagnosed by a doctor

The items you cannot deduct continue to be the same such as over-the-counter medicines, toothpaste, cosmetic surgery, gym memberships, nutritional supplements, nicotine patches or gum and teeth whitening.

Some taxpayers may be confused because maybe they think that this is only the state and local taxes withheld on their Form W-2. No, it is more than that. It is that plus the real estate property tax, property taxes such a the tax from the DMV taxes you pay for owning your car or cars, All these make up a huge chunk and the $10,000 cap may be way less than the actual amount spent. For some taxpayers, this deduction can mean it is $1,500 less but for other it could mean it is $18,000 or even $25,000 less.

There are two items you must consider in your ability to deduct home mortgage interest on your tax return. First, you will only be able to deduct the interest on the first $750,000 of your home mortgage debt. This may not matter in Bakersfield, California, for example, because homes there are way below this amount. However, in San Francisco, the median home price is $1.5 million. Second, the interest on home equity loans will no longer be deductible. Well, this only affects the loans taken out and used for purposes other than to improve the current home. Therefore, no more taking out a home equity loan to pay off your credit card and auto debt, it will no longer be deductible.

Another important thing about home mortgage interest is that this applies for loans acquired after December 15, 2017, you remain unaffected by the new tax reform. You will be able to deduct your interest as you have been doing, all of it. With home equity loans, though, this is a different story as the new tax law affects even loans that were acquired before December 15. 2017. You will not be able to deduct home equity loan interest regardless of when you acquired the home equity loan.

Okay, back to charitable contribution changes. This raise is the charitable contribution deduction can be used to be able to contribute more to your favorite charitable organization and make up for the loss of deductions elsewhere. However, even though this is a positive change in the tax law code, the other changes to the code will indirectly impact contributions to charitable organizations (Miller n.d.).

Colleges and universities counted on the previous tax code that permitted the 80 percent deduction, but now they are out of luck with the new tax law reform. This means that these colleges and universities will lose millions in revenues. Many colleges and universities relied on the 80/20 rule for charitable donations to encourage athletic programs, scholarships, and other programs of the institution.

If you know the rules for deducting charitable contributions when you receive a benefit in exchange, you will probably better understand the new law's position on this issue. The rules are for deducting contributions for which you get a benefit in return. If any part of your payment toward a charitable contribution is for tickets (rather than the right to buy tickets), 100% of that part is not deductible. You have to reduce the amount of your contribution by the value of any benefit you receive. However, you don't have to reduce your contribution amount if you received (1) only a small item or other benefit of token value, and (2) the qualified organization correctly determines that the value of the item or benefit you received isn't substantial and informs you that you can deduct your payment in full. The organization will be using Revenue Procedures 90-12 and 92-49 to determine this.

Basically, if you receive a benefit as a result of making a contribution to a qualified organization, you can deduct only the value of your contribution that is more than the value of the benefit you receive.

When you make a payment to the college or university for the right to buy tickets to an athletic event in the athletic stadium of the college or university, you are getting a benefit in return: the right to buy tickets and usually this gives you the right to buy tickets for a designated area of the stadium or some form of preference. After January 1, 2018, you longer are able to do this and get a charitable contribution deduction. However, if you pay $300 to the university for tickets for which you would normally pay $75, then you can possibly deduct the difference as a charitable contribution. As long as the organization you pay this to is a qualified organization and the event usually would have to be for charitable purposes.

Contemporaneous means that the donor receives the acknowledgment by the earlier of

• the date on which the donor actually files his or her individual tax return for the tax year that applies to the contribution, or
• the due date of the tax return, including extensions.

The taxpayer can provide another form of substantiation such a thank you letter from the organization as long as this other form of substantiation provides the same information of the donee organization.

Alternatively, the taxpayer could provide the Internal Revenue Code permitted the charitable organization to file a document with the IRS containing detailed information about the donor and his or her donation.

However, with the new Tax Cuts and Job Act, this alternative process has been eliminated. Consequently, this does not seem to be a problem, since most charitable organizations usually send thank you letters to their donors. It only makes sense that they do because they want the contributions to keep coming. The donor taxpayer can use this letter as substantiation that they have made the donation. That's it with the changes to charitable contributions in the new Tax Cuts and Job Act - the alternative gift substantiation for gifts of $250 or more has been eliminated.

There are other items to consider though. The fact that Congress has doubled the standard deduction means that less individuals will donate because there will be no tax incentive to do so since many people will not itemize due to the larger standard deduction. So this in itself will affect charitable organizations, indirectly. No really, indirectly because the organization will lose billions annually and this is very direct. Don't you think?

Another change in the new law that will affect charitable organization is the fact that the new tax law increased the estate tax threshold and this means that fewer estates will be subject to taxation and again affecting indirectly the pockets of the charitable organization by having less bequests to charitable organizations.

On a good note, the new law has increased the Adjusted Gross Income limits for cash contributions from 50 percent to 60 percent. 10 percent increase means more money from donors to the charitable organizations.

The suspension of this deduction brings a greater grief than what it appears to be on the surface. One example of this is the deduction for hobby losses. With this elimination, the hobby losses will be eliminated 100%. Many figure that you can take hobby expenses up to the income earned, but this is not true, well, not anymore. With the new tax law, you will be able to deduct zero of your expenses that you had to acquire hobby income. You will see that there are many other items which are affected. Another one of these items that will be greatly affected by this change that seems to be harmless is the office in the home deduction which is no longer available to employees of a company who work from home. It is quite convenient to work from home. The office in the home deduction for employees which was a deduction that you can take about the 2% of AGI is no longer an option. This new tax law has affected items as the 2% of AGI deduction and has caused chaos for many taxpayers on many different platforms.

Now with the new law, effective January 1, 2018 and before January 1, 2026, this limitation is suspended. This means that you will not be seeing this section on Schedule A for tax years 2018 through 2025.

You already know very much how it all works. As before, this tax credit will reduce your tax bill on a dollar-to-dollar basis by $2,000 now instead of the previous $1,000 per child. So now if your tax bill is $4,000, and you have two dependents, bingo, you will owe nothing. It is a nonrefundable credit so it goes against tax. We call this credit "tax killer". What do you call it?

To top it off, there another credit that can be added on top of that for those who have other dependents who are over the age of 19 such as your parents. This one is $300 per each of these types of dependents.

One more thing. Your income in order to claim any of the Child Tax Credits must be only up to $200,000 if you are single. That is a huge hike from the current limit of $75,000. Likewise the amount for married folks is up $400,000 and that too is a hike from the current limit of $110,000. Now more taxpayers, ones that could not take the credit because of the set limits will now be able to take the Child Tax Credit. A married couple together earning up to $400,000 are not too rich, right?

A credit that reduces your tax liability is a nonrefundable credit. Taxpayers have many tax credits that are "tax killers" that will help them eliminate their tax liability. If the taxpayer has children, there are more options and more available credits to them than when there are credits which don't include children. The child tax credit was started to help families raise their children. Raising a child is not cheap and many struggle to make ends meet. A credit that allows for a refund after taxes have been paid such as the newly expanded child tax credit is a refundable credit.

For tax year ending in 2017, the child tax credit was for $1,000 per qualifying child. This credit was gradually phased out for single taxpayers with adjusted gross income of above $75,000 and married filing joint filers of above $110,000. However, for 2018, these amounts have changed to $400,000 for married filings jointly and to $200,000 for all the others.

With the Tax Cuts and Jobs Act (TCJA) the child tax credit will change starting for tax year 2018. First of all, the credit amount is now going to be $2,000 per qualifying child and the requirement that the child be under 18 still remains a requirement. Besides the age requirement of being under 17, the other rules are basically the same as the rules for claiming a dependent child. If the taxpayer is owed a refund, the child tax credit has a refundable portion of up to $1,400 for 2018. Before this same portion of the credit was a nonrefundable credit. That is a possible extra $1,400 that families can get in addition to other credits such as the Earned Income Credit and their tax withheld amounts. This means larger much needed refund checks for working families with children. In order to claim the credit, the family must have earned at least $2,500 for the tax year.

The phase out for the child tax credit starts at $200,000 for a single taxpayer and $400,000 for joint filers. This means that the individual who earn over $200,000 if single or $400,000 if married will start seeing a decrease in the amount of the child tax credit to be claimed. Now with these higher phase-out limits will allow more taxpayers to claim the child tax credit. The child does not need to be a citizen to qualify the parent for the credit, but he or she does have to have a Social Security number issued by the Social Security Administration.

The new thing that is new now is the ability to get the credit if you don't have a child under the age of 17. The new tax reform allows taxpayers to claim a $500 credit for dependents such as parents and other members of the household. There is no age limit for this new part of the child tax credit. How odd is that? Now you can get a child tax credit for a parent. Not only parents but other dependents too. You can claim the child tax credit for a child who is disabled and dependent you support who is a full-time student.

There is still a possibility that all this good news will not last beyond 2025 as this new increase in the child tax credit and the qualification rules are set to expire by 2025 - by December 31, 2025 to be more exact. This legislation, the new Tax Cuts and Jobs Act (TCJA) has, at least for a temporary time, taking into account hard working family with a much needed refundable child tax credit which is going to make an incredible difference in the lives of kids all around the country. To top it off, the child credit has been expanded to include more children, not just the children under 17. Furthermore, the child tax credit has somehow morphed into a non-child dependent credit allowing a refund of $500 more for dependents who are not qualifying children under the age of 17.

This new Tax Cuts and Jobs Act (TCJA) reform cannot possibly only be for the rich if you look into the generosity behind the new revamped child tax credit. There has been a lot of talk on national T.V. as to the new tax law being for the rich. Maybe it is for the rich starting January 1, 2026 but for now the new child tax credits disproves the theory that the new tax reform of 2017 is for the rich

If in 2017, your modified adjusted gross income (AGI) is more than the following amounts then the amount of the $1,000 child tax credit is either reduced or totally eliminated.

• Married filing jointly the phase-out amount is $110,000
• single, head of household, or qualifying widow(widower) the phase-out amount is $75,000
• Married filing separately the phase-out amount is $55,000.

Compare this to the 2018 phaseout amounts. For 2018, if your modified adjusted gross income (AGI) is more than the following amounts then the new amount of the $2,000 child tax credit is either reduced or totally eliminated.

• Married filing jointly the phase-out amount is $400,000
• single, head of household, or qualifying widow(widower) the phase-out amount is $200,000
• Married filing separately the phase-out amount is $200,000.

Now with the new tax law your income in order to claim any of the Child Tax Credit, which is up to $2,000 per child by the way, must be only up to $200,000 if you are single. That is a huge hike from the current limit of $75,000. Likewise the amount for married folks is up $400,000 and that too is a hike from the current limit of $110,000. Now more taxpayers, ones that could not take the credit because of the set limits, will now be able to take the Child Tax Credit. A married couple together earning up to $400,000 are not too rich, right? Well at least that is what they say when they talk about how poor they are.

If the child did not have a Social Security number, an ITIN number could be used to claim the child tax credit for the $2,000 amount. Now, under the new tax bill, children with ITIN number will need to provide a Social Security number in order to claim the child tax credit for that child since now the child tax credit is refundable. In order to claim the refundable part and the non-refundable part of the credit a Social Security number must be provided. The idea behind this is that most children who have an ITIN, have an ITIN because they are undocumented. This is going to impact the entire family because as you may be well aware of families that immigrate to the United States have both foreign born and US born children.

Let's face it, we are a country that has allowed for this to happen and now in the process of trying to change things, we are hurting innocent people and United States citizens too! This new bill will directly affect those children born in the United States whose non-citizen siblings are no longer eligible for the credit and thus impacting the entire family. This situation is similar to the situation where the illegal parents are deported and it does not take a brain surgeon to know that we are also deporting American citizens in the process. What? Did you think that the American children stay behind in the United State in orphanages? Go back to the cave you peeped out of if you think that is the case and don't come out until you realize your illogical fallacy.

Also if you have not realized it by now that only the rich immigrate legally, then there is definitely something wrong and you probably should rethink things - maybe not totally. We have yet to see a day laborer, for example, try to immigrate to the United States legally. Another thing to consider is the fact that not too many people who are well off in their country want to immigrate to the United States. There is always a catch. For example, students immigrate here because after they finish their studies they get used to our way of life, they make new friends and at the end they simply stay here and this group of well-educated individuals, the students, decide to stay in our country forever. Then, they force their parents to move here because the grandparents want to be with their grandchildren. You never thought of it like this, have you? Would someone remind us next time not to hire an individual to be boss who has married immigrants and who by the look of things is about to divorce another one - because this individuals start hating his ex-wives and then he wants to make all immigrants including children both American and immigrant suffer for his mistakes.

If you don't want to offer tax credits to illegal immigrants, that is probably fine. But what is not fine is that you charge them taxes just like U.S. Citizens. We keep hearing these senseless individuals saying that they want only people who play the rules to be rewarded - then you must allow the less fortunate to be able to play by the rules. Let's face it - immigration laws do not allow people who don't have money to play by the rules.

Let's do it - Let's not allow undocumented immigrants to receive any tax benefits but you cannot tax them either. Are we ever going to learn from our history? Let's go back to 1761 and recall the phrase "No taxation without representation!" Maybe someday, good sense and fairness will enter our vocabulary once again. Quit your excuses and self-serving righteousness to steal other people's money. When you tax individuals and rob them of their right to receive tax benefits available to others who pay exactly the same, you are technically stealing their money.

Now amongst other things, the new TCJA tax reform will double the child tax credit from $1,000 to $2,000 per qualifying child under age 17. Furthermore, get a hold of this, the new TCJA tax reform allows for a new $500 credit per any of the dependents who are not qualifying children under 17. As long as they are your dependents and pass the dependent tests, there is no age limit for this $500 credit. It seems very much that we need to change the name of this credit from child tax credit to child and dependent tax credit. This new child tax credit, however, is nonrefundable.

To be able to claim the child tax credit for a qualifying child, you must have a SSN for the child. The previous law permitted taxpayers to use individual taxpayer identification numbers (ITIN) or adoption taxpayer identification numbers (ATIN). Now with the new ICJA tax reform, it specifically states that if the child does not have a Social Security Number (SSN), you will not be permitted to claim the $2,000 credit. However, you will still be allowed to claim the $500 credit for that child using an individual taxpayer identification number (ITIN) or an ATIN. Although the SSN requirements don't apply for a non-qualifying child dependent, you still must provide an ITIN or an ATIN for each dependent in order to claim the $500 child tax credit.

We all should know by now how the AMT works by now. We have two separate tax systems, one is the regular tax system and the other is the AMT tax system. The alternative minimum taxes certain types of income that have been used to claim certain credits and deductions under the regular tax system and ultimately disallows some tax breaks allowed in the other tax system. The good news is you have really good tax breaks. The bad news is that you owe ATM tax and those good tax breaks we mentioned before are no longer applicable. That is the common story behind the alternative minimum tax.

The purpose of the AMT is to effectively take back some of the tax breaks allowed for regular tax purposes. The AMT is an additional tax that you may owe if for regular tax purposes you claimed:

• Itemized deductions, such as taxes, interest on home equity loans used for nonresidential purposes, medical expenses, and miscellaneous job and investment expenses.
• Certain tax-exempt interest, accelerated depreciation, and incentive stock option benefits.

There are no specific tests to determine whether or not you are liable for the alternative minimum tax (AMT). You must first figure your regular income tax and then see whether tax benefit items must be added back to taxable income to figure alternative minimum taxable income, on which the AMT is figured. If after claiming the AMT exemption and applying the AMT rate and the tentative alternative minimum tax exceeds your regular income tax, the excess is your AMT liability, which is added to the regular tax on your return. In other words, your tax liability for the year will the greater of your regular tax or your alternative minimum tax (AMT).

With the new Tax Cuts and Jobs Act (TCJA) rules, the maximum AMT rate will only be 28 percent. That is huge improvement for the taxpayer from the previous 39.6 percent maximum rate that applied under the previous old law. Previously, the 28 percent AMT rate kicks in when AMT income exceeds $187,800 for married filing joint filers and $93,900 for the rest. However, for 2018 and beyond, the 28% AMT rate starts only when AMT income exceeds $191,500 for married filing joint filers and $95,750 for the others.

To make things better, you are allowed an AMT exemption and it is deducted when you are calculating the AMT income. This exemption amount is significantly increases for tax years 2018 through 2025. Once the AMT surpasses the applicable threshold, the exemption amount is phased out. However, those thresholds are also very generous and the TCJA has greatly increased them for tax years 2018 through 2025. The TCJA has increased the individual AMT exemption amounts for tax years 2018 through 2025 to $109,400 for married filing joint filers and surviving spouses, to $70,300 for single filers, and to $54,700 for married filing separate filers. Once the taxpayer's alternative taxable income is above $1 million and $500,000 for the other taxpayers, the increased exemption amounts are reduced by 25% of the amount of the taxpayer's AMT income above these amounts. Notably, the increased exemption amounts will not be reduced below zero.

It is important to plan your taxes and try to avoid being hit by the AMT. However, it may be a bit difficult to try to pinpoint what will trigger the alternative minimum tax since there are so many factors involved. First, high income can cause the AMT exemption to be partially or completely phased out and this would a factor that increases your chances of owing the alternative minimum tax. The TCJA has lowered some of its regular tax rates (5 of them) while leaving the AMT rates at 26 percent and 28 percent will definitely not help you in trying to avoid the AMT.

Other items that may cause you to own the AMT are large itemized deductions that include deductions for state and local taxes. This is especially true since these taxes are completely disallowed under the new AMT rules. The new tax law limits the regular tax deduction for state and local income taxes and property taxes combined to $10,000 ($5,000 if married filing separate).

Another item that may cause you to trigger the AMT is having too many personal and dependent exemptions because these are completely disallowed under the AMT rules. This is specially true since for 2018 through 2025, personal and dependent exemption deductions are completely eliminated under the new TCJA tax reform.

Incentive Stock options (ISOs) do not count as income under the regular tax rules but they do count as income under the alternative minimum tax rules. So if you have these (no change from the old rules), you may trigger the AMT.

You can no longer include investment expenses, fees for tax advice and tax preparation and unreimbursed employee business expenses for itemized deductions under the new tax rules. However, under the old tax law or under the new these items remain as disallowed for the alternative minimum tax, therefore, this would not be a trigger for the AMT, at least this time around.

Other items that would be of interest to look into for possible triggers of the AMT are interest income from privacy activity bonds, claiming the standard deduction since it is now almost doubled. The new tax law no longer allows a deduction for home equity loan interest, so therefore, this is not an item of threat or that would trigger the AMT.

The alternative minimum tax (AMT) liability is figured on Form 6251 and is attached to Form 1040. If you file Form 1040A, AMT liability, if any, is figured on a worksheet and the AMT is included on the line for "Tax" on Form 1040A. After you determine your regular income tax liability, you use Form 6251 to compute AMT liability, if any.

The new rules make it easier for a small business to claim at least a modest new QBI deduction and this deduction is available even if the small business is sole proprietorship which means that it is not actually necessary to have an actual business entity like a partnership, LLC or an S-corporation. This deduction is even greater for large scale businesses. On the other hand, a business who primarily relies on the efforts of its owners, whether they are Specified service business, or those that have a limited amount of employees or capital investments, may find taking QBI deduction a bit more complicated. Especially noticeable in this case would be individual who are over the new income threshold of $157,500 for individuals and $315,000 for married filing jointly.

The new deduction for pass-through businesses was created by the Tax Cuts and Jobs Act (TCJA) and this deduction can allow you to take a deduction for up to 20% on income from your sole proprietorship, partnership and other business such as S corporations that are pass-through businesses. The amount of the deduction that you can take will vary depending on

• The nature of the business activity.
• The total income of the owner.
• The total payroll amount paid to employees
• How much property the business owns.

There are two classes of businesses taken into consideration for the 20% deduction. First class of business is the business that provides certain personal services such as law firms, medical practices, consulting firms and professional athletes. In the second class are all the other businesses that are not part of the previously mentioned.

After that, the business owners are divided into three groups such as

• Single owners making less than $157,500 or married filing joint filers making less than $315,000 total taxable income may take the full 20 percent deduction on their business. In this case the kind of business does not matter.
• Single owners making more than $207,500 or married filing joint filers making more than $415,000 will not be allowed any deduction if their business is a personal service firm such as attorney, doctor, consultant or professional athlete and other businesses considered a personal service business. However, other types of business may allow them the deduction.
• The owners who are single making between $157,500 and $207,500 will be allowed a partial deduction. Likewise, business owners who are married filing jointly making between $315,000 and $415,000 will only be eligible for a partial deduction. The kind of business will not matter for the partial deduction but it will phase-out for the personal service firms.

To claim the deduction and the limits on the deduction, the taxpayer must calculate the Qualified Business Income (QBI) which normally the business owners business net income. If the taxpayers QBI is less than $157,500 for single or less than $315,000 for married filing joint filers, then simply multiple that amount by 20 percent and that is the deduction.

The story gets a bit more complicated if the owner owns one of the specified service businesses and is above the $157,500 for single and the $315,000 threshold for married filers. In this case the amount of the QBI is phased-out until it disappears once their taxable income reaches $415,000.

Some businesses personal service firms or not, may have to calculate their deduction for limitations based on a two-part formula. The deduction will be partially limited by the greater of either 50 percent of the wages the business pays to its employees or 25 percent of wages plus 2.5 percent of the basis of the business' qualified property. The business owner then takes the smaller of this calculation and the 20% of their QBI calculation. As with many other deductions in the tax code that apply two calculations, you may only deduct the smaller of the two amounts.

The new pass-through 20 percent deduction is great for all business owners. If you think about it, this deduction is not really a pass-through business deduction but a deduction for all business owners since it also includes sole proprietorships. Maybe what happened was that the original idea was to only offer this deduction for pass-through entities such as corporations, but later at the end everyone decided to be generous and to also include sole proprietorships in the deal. After all, the TCJA of 2017 was a tax reform that was rushed at the end of the year around holidays when so many are compelled to be highly generous.

Large businesses are probably the ones who will benefits the most. A business which primarily relies on the efforts of its owners, whether they are a specified service business, or those that have a limited amount of employees or capital investments, may not have too many options for the QBI deduction. There are new income threshold of $157,500 for individuals and $315,000 for married filing jointly. This deduction can allow you to take a deduction for up to 20% on income from your sole proprietorship, partnership and other business such as S corporations that are pass-through businesses. The amount of the deduction that you can take will vary depending on the nature of the activity, total income of the owner, total payroll and property owned by the business. There are two types of businesses which can take 20% deduction. Businesses that provide certain personal services such as law firms, medical practices, consulting firms and professional athletes are in the first category. All others are in the second class category.

This law will be in effect for tax years 2018 through 2025. After that we don't really know what is going to happen. We kind of know that the law will revert, but that all depends on who is in charge at that time. For now we have to worry about the new tax rates that pertain to the kiddie tax and the changes that were made with the new TCJA revisions. The new tax rates can be as high as 37% for ordinary income or as high as 20% for long-term capital gains and qualified dividends.

The prior law for the kiddie tax, the portion of an affected child's unearned income, were taxed at the parent's marginal tax rate if that rate was higher than the child's tax rate. This means that for 2017, the parent's rate could be as high as 39.6% for ordinary income or as high as 20% for long-term capital gains and dividends.

Remember that for kiddie tax purposes, we are mainly concerned with unearned income such as income from investments or income that is not income from wages, salaries, professional fees or any amounts otherwise received as compensation for any kind of services rendered.

The new kiddie rules have changed forcing taxpayers to use the trust and estate tax rates structure. This structure is less favorable because it overrides the lower tax rates that would apply to a child's unearned income. This trust and estate tax rate structure is compressed compared to the brackets for single individuals.

When you calculate the federal income tax for a child who's subject to the kiddie tax, the child is allowed to deduct his or her own standard deduction. Under the new law, the kiddie tax could affect children who don't provide over half of their own support in 2018 and who live with their parents for more than half of the year.

The kiddie tax will most likely apply until the year the child reaches age 24. These are the requirements for the kiddie tax:

• The child does not file a tax return for the year.
• One or both of the child's parents are alive at the end of the tax year.
• The child's net unearned income for the year exceeds $2,100 income threshold for 2018. Only the income that is above the $2,100 will be liable for the kiddie tax.
• The child may be liable for the kiddie tax if the child is 17 or younger, if 18 with no earned income that exceeds half of his or her support, is 19 to 23 and a student or does not have earned income that exceeds half of his or her total support for the year.

The kiddie tax applies to unearned income for children under the age of 19 and college students under the age of 24. Unearned income is income from sources other than wages and salary, like dividends and interest. Taxable income attributable to net unearned income will be taxed according to the brackets applicable to trusts and estates. With respect to earned income, the rules are the same as before. The kiddie tax rules were in place to prevent parents and grandparents in high tax brackets from shifting income to children in lower tax brackets.

In case you don't know, 529 plans are tax-advantage investment accounts which were originally designed to help families pay for a college education for their child. It is based on tax free interest compounding. Any 529 withdrawals are tax-free so long as you use the funds toward qualified higher education expenses. These expenses include tuition, room and board, and even computer software and hardware.

Now the new tax law, allows parents to use these same benefits to pay for their child's education which means that the parent would be able to send their children to private grade schools and high schools. The 529 savings plans have not income limits, no contribution limits, no contribution deadlines, and no account time limits.

Here is the deal. The new tax bill will allow you to use 529 plans for up to $10,000 per year in K-12 grade tuition expenses. This is important for families who send their kids to private schools or to religious schools. Moreover, if the family is already saving in similar plans such as the Coverdell ESA, they can switch to a 529 plan and rollover the amounts with absolutely no tax consequences whatsoever.

There is one first question that comes to mind. How is this 529 savings plan, which usually has to do with saving money by making any interest received tax-free income when your infant or young child is of college age, going to help for a child's immediate education? There does not seem to be too much benefit there, it there? These are normally long term investments - say 5 or 10 or even 18 years for when you child is ready to go to college. One benefit to think about in the short term is the fact that your state may have a deduction or credit for contributions made to a 529 plan. The deduction would depend on your state with deductions limits ranging from $500 per year to the entire amount of the 529 plan contribution. Your state may even carry forward any excess contributions for later years. Some of the states that offer such credits or deductions include Arizona, Kansas, Minnesota, Missouri, Montana and Pennsylvania.

On another note, you many consider having two 529 savings plans - one for your child's college education and another to serve the purpose of the K-12 education.

Furthermore, you can rollover your existing 529 savings plans to a 529 ABLE account. 529 ABLE accounts are good for parents who have children with disabilities.

The annual contribution like is adjusted for inflation as are most other items in the tax code. For the 2018 tax year an adjustment to ABLE for inflation is set at $15,000. Previously the annual contribution for ABLE was $14,000.

The annual contribution limit for the ABLE is $15,000 in 2018. ABLE account owners can choose to contribute to their own accounts, have friends contribute or have family contribute to the account. The ABLE account owners who decide to contribute to their own account are now able to take advantage of the Retirement Savings Contributions Tax Credit which is also known as the Saver's Credit. However, you have to qualify for the Saver's Credit. The Saver's Credit is a non-refundable credit.

If you are the both the owner and the beneficiary on both accounts, you are now able to transfer funds in a 529 college savings account to an ABLE account without incurring any tax or penalty. However, the funds rolled over from the 529 college savings account to an ABLE account are still subject to the annual contribution limit of $15,000 for the tax year.

That is, unless the ABLE account owner is employed. If so, under the ABLE to Work Act, the ABLE account owner may be eligible to contribute above the $15,000 annual contribution limit and depending on the gross income this amount could be an additional $12,060. These contributions which are above the $15,000 annual contribution limit would be limited to contributions made specifically by the account owner into their ABLE account.

If you have current student loans or are paying back student loan debt you must know the tax consequences of not paying your student loans. Student loans are debts that not even forgiven in bankruptcy. However, there are still some deductions you can take. The student loan deduction remains the same and you are still allowed to claim a deduction of up to $2,500 for the interest you pay on student loans every year. Additionally, tuition waivers for graduate students remain tax-free. This means you could waive your tuition even if it is $50,000 per year. 

You can discharge your federal and private student loan debt and you will not have to pay any tax from 2018 through 2025. The student loan discharge will no longer be treated as taxable income by the Internal Revenue Service. After 2025, it is to be seen what will happen. But for now the new tax bill excludes student loan debt forgiveness from taxable income if you are permanently disabled. It also excludes student loan forgiveness in case of death. You may be thinking that nothing will matter after you are dead, although for many people this is not true specially if they have children who depend on them, this is quite important if your student loan was cosigned by someone. The cosigner will not be held accountable for your student loan because it will be a tax-free transaction.

The new Tax Cuts and Jobs Act has remained generous with student tax matters and has not suspended any of the credits that pertain to education. For example, there is a favorable change to the rules as to how money can be used for the 529 savings accounts to include K-12 and not only the previous only for college rule. The credits remain intact such as the Lifelong Learning Credit. This new rule to make discharge of certain student loan indebtedness completely tax free from 2018 through 2025 is another one of these benefits display concern for the well-being of our students.

NOLs are business operating expenses on its tax return that exceeds its revenues. It is a net operating loss (NOL) that it creates and according to the tax code can probably be carried forward (or even carried back) to another time when the business has taxable income and thus it can be offset by the NOL. This makes very much sense because the success of the company in the future depends mostly on all the efforts of the company at first. This kind of makes sense also because income should always be matched with its expenses.

The Tax Cuts and Jobs Act (TCJA) provides major changes especially to corporate tax law. Why do people want to make the Tax Cuts and Jobs Act (TCJA) have the name the "Act" stick? It is not the "Act" as there too much in this act to be desired. So quit trying to make the name the "Act" stick. It will never stick because for it to stick, taxpayers have to believe first that it is the act of acts. Seriously want to call an act that was poorly written and rushed at the end of the year, the "Act", there must be some hidden agenda behind that. You advertising something is the hopes that it sticks, well that is not going to happen this time around. Should we say "Nice try"?

There has been a major change to the NOL carryforward and carryback rules and a new limitation on NOL utilization has been added. Before this new tax reform NOLs were allowed to carry a NOL back to two years and a carryforward for twenty years and the NOL was allowed to fully offset taxable income of the taxpayer unless specific limits were in place by the Internal Revenue Service. These specific limits were known as section 382 limitations. These are no long applicable and thus they have changed with the new Tax Cuts and Jobs Act (TCJA) reform.

Now there are amendments in section 172 that disallow any carryback of NOLs. However, these same amendments allow indefinite carryforwards of these NOLs. The new carryback and carryforward amendments apply to any NOL arising in a taxable year ending after December 31, 2017.

As to the carryback limitation, many can argue that it is unfair because little notice has been given as to what a taxpayer, who perhaps was planning a carryback and to his or her surprise woke up January 1, 2018 with the news that this is not possible. However, the law says that the new law is effective for NOLs arising in tax years ending after December 31, 2017 which means that the January 1, 2018 is when the new NOL rules start applying. Therefore, if you had an NOL for a tax year ending December 31, 2017, then, according to the law, you should be able to carry it back by using the old NOL rules.

The new Tax Cuts and Jobs Act (TCJA) has limitations on the amount of NOLs that a corporation may deduct in a single year under section 172(a) equal to the lesser of the available NOL carryover or 80 percent of a taxpayer's pre-NOL deduction taxable income. This is the 80 percent limitation rule. Again, this limitation applies only to losses arising in tax years that begin after December 31, 2017 as amended by section 172(e)(1). This is actually good news for taxpayers who have previous NOLs. We are working on 2018 now, so if you develop an NOL in 2018, you definitely will not be able to carryback any of it.

The new rules seem to be in sync with what a NOL should really be. It should be a deduction that has the income matching concept in mind. It really does make sense that if all your efforts at the beginning of your business will bring fruit for later years, that we match income to its expenses. If you are going to follow one of the basic underlying guidelines of accounting, you will agree that the new tax law is following the matching principle of accounting. This goes awry when you are applying expenses incurred now to earlier years. You know it takes money to make money. That should probably tell you everything. You are spending money to make money. It is not the other way around.

How is repealing the ACA without coming up with a replacement for it, still remains a mystery. All of us know that repealing the individual mandate in 2019 would increase the number of uninsured Americans. However, a penalty of at least $695 per person for not having the insurance is quite steep. Imagine a family of five with none any of them having insurance. That is a penalty of at least $2,085 for not having health insurance. There are many people out there who have a lot of money but don't have a dime to spend on insurance. These are the poor rich. There are people out who do not qualify for state benefits for instance because they are classified as having money. If they have a car or a house that is worth over a certain amount, the state will tell them to sell their property and that they don't qualify for state benefits. If these same people don't qualify for health care, then you can see it would be problematic to penalize them for not having minimum coverage. Minimum health insurance coverage does not come cheap, just like this penalty is quite steep. Maybe the ACA is not as perfect as many seem to want to make it appear to be.

One of the main provisions of the Obamacare is the guarantee that health insurers can no longer be able to deny coverage based on current or prior health conditions. This in turn would cause premiums to trend higher. Secondly, there are certain minimum coverage standards which are called essential health benefits (EHB). Furthermore, children can remain in their parents' health coverage until they turn 26. Third, you are required by law to purchase health insurance or you must pay a non-compliance penalty. Another provision of the ACA is the health insurance exchanges. You can purchase the health insurance through your employer or the government, state's exchange, federal exchange, or other. Another provision of the ACA is that individual and families with an income less than 400% of the federal poverty level who purchase health insurance through the exchange can get government subsidies.

One of the major provisions of the Obamacare was an increase in the Medicaid income threshold used to determine if an individual or family qualifies for the program. Obamacare has been one of the most costly social programs in the history of the United States. We are trying to be like the other countries in Europe and everywhere else that provide total healthcare to their citizens. It seems that we have fallen behind and have failed to provide the proper healthcare to our citizens. We are still trying to figure it out and now with Obamacare repeal it may just as well be a step back. The problem is that one program is being repealed with no acceptable replacement. Come on! If you are going to repeal something, it is because you have something better to replace it. By the look of things, that does not seem to be the case.

The Affordable Care Act (ACA) forced individuals to have minimum essential insurance coverage or pay a penalty through their tax return if they did not get the coverage or qualify for an exemption from coverage. With about four millions individuals in 2016 and 5.6 million individuals in 2015 paying a penalty, it seems that the ACA minimum essential insurance coverage mandate caught many off guard. The meetings in December of 2017 were not enough to come to an agreement as to the Affordable Care Act and its elimination. Therefore, the Affordable Care Act continues as usual until the end of the 2019 tax year. We will be filing 2019 tax returns in 2020 that will still include the Affordable Care Act provisions and compliance obligations.

The healthcare insurance compliance penalty for 2016, 2017 and 2018 is the greater of $695 or 2.5 percent of household income, less the filing threshold amount. The maximum amount of penalty could only be $2,085. The taxpayer had the option to apply for a penalty exemption on Form 8965 with his or her tax return. The calculated amount for not having the minimum essential coverage is the shared responsibility payment required to be made on your tax return when you fail to acquire coverage. The shared responsibility fee is the compliance penalty you have to pay if you fail to comply.

The premium tax credit continues and thus taxpayers who continue to pay for coverage will continue to be able to claim the credit. Even after 2019 when the Affordable Care Act has been done with, there is no intention in the code for discontinuing the premium tax credit.

This shared responsibility fee will be eliminated starting with the filing of your 2019 tax return in 2020. In the meanwhile, you are still responsible to have acquired minimum essential coverage or pay the penalty for not complying. The Tax Cuts and Jobs Act (TCJA) eliminates the Affordable Care Act share responsibility penalty beginning in tax year 2019. Therefore, for two years after the TCJA has been passed, we will still be calculating the Affordable Care Act penalty for taxpayers who have not acquired minimum essential health coverage. There are other changes that interact with this penalty.  Therefore, you must be diligent in how your taxes may be affected by the Affordable Care Act provisions.

Many taxpayers are misinformed and believe that the Affordable Care Act is done with. On the contrary, we still have two more years to go with the Affordable Care Act compliance obligations. The ACA continues as if there is no Tax Cuts and Jobs Act (TCJA) in place. The intention was to eliminate it December 2017 but it turned out to be a more complicated task. One of the main reasons that the Affordable Care Act failed to be repealed was due to the fact that there was no replacement for it. It only makes sense that if you are going to try to repeal something as important to the individual health provision, that you will have a suitable replacement for it.

The Affordable Care Act continues to be the law of the land. You must comply because the Affordable Care Act continues for another two years. You must comply or be forced to pay a shared responsibility payment and the Affordable Care Act (ACA) will continue to force individuals to have minimum essential insurance coverage or to pay a penalty through their tax return if they did not get the coverage. The alternate is to qualify for an exemption from coverage. The healthcare insurance compliance penalty for 2016, 2017 and 2018 is the greater of $695 or 2.5 percent of household income, less the filing threshold amount. If you continue to pay for coverage, you can continue to claim the premium tax credit. The Affordable Care Act will continue to require the filing of Form 1094 and Form 1095. These forms are still required for tax years 2017 and 2018 tax returns. The Affordable Care Act requires that large employers to file informational returns and furnish statements to their full time employees as to the coverage, if any, that they offer to full-time employees by using Form 1094-C and Form 1095-C. Many taxpayers are not going to informed about the rules correctly. The ACA continues until the end of 2019.

The Internal Revenue Service usually rejects tax returns that are sent incomplete. The IRS rejecting your tax return for being incomplete means that you have not filed a tax return. The IRS sends the entire tax return back to you to give you another chance to fix the problem. This is not really considered giving you a chance to fix it since they are basically rejecting what you have sent and you have to start over. This means that if you waited to the deadline to file your tax returns and it gets rejected, you have not filed on time. Therefore, if you send your tax return with any evidence of coverage or a penalty payment

Another thing to consider is that the repeal of the tax penalty is not a repeal of the individual mandate provision. There are restrictions placed on Congress as to what it can and what it cannot do and these restrictions apply to the repealing of the individual mandate to acquire basic essential health insurance coverage. What will happen is yet to be seen because you cannot repeal something as important as a healthcare mandate and not have an adequate replacement for it. By the sound of things, the proposed replacement is nothing in comparison with the Obamacare. The general rule is that a repeal of statutory language that is primarily regulatory such as Obamacare's individual mandate - is routinely off-limits in the budget reconciliation process (Moffit 2018).

There are many employee fringe benefits affected by the Tax Cuts and Jobs Act (TCJA). First, the employees can no longer deduct unreimbursed business expenses. Second, moving expenses are no longer deductible like they used to be. Third, the employer can no longer deduct qualified transportation benefits for providing tax-free transportation fringe benefits by the employer. Neither can the employer deduct any expense incurred for providing any transportation between the employee's residence and place of employment. Fourth, entertainment expenses are out as the TCJA does not allow an employer to claim a tax deduction for entertainment. In addition, the TCJA will continue to allow the value of meals to be tax-free provided certain conditions are met. Finally, the TCJA limits the conditions of tangible personal property for employers who make a tax-free award of tangible personal property for length of service or safety achievement.

Unreimbursed business expenses are no longer allowed. If an employer reimburses an employee for a business expense, the reimbursement is tax-free to the employee, but if the employer does not reimburse the employee, the employee is no longer allowed to claim a tax deduction for this expense.

The rules for employer-operated eating facilities remain at only 50% deductible. Section 123(e)(2) provides the value of meals can be tax-free if

• The facility is located on or near the employer's business premises.
• The facility's annual revenue equals or exceeds its direct operating costs and
• For highly compensated employees, the facility is operated without discrimination in favor of such employees.

Section 119 provides the value of meals furnished to an employee can be tax-free if

• The meals are provided on the employer's business premises.
• The meals are provided "for the convenience of the employer".

However, the TCJA tax reform now imposes a 50% limit on deducting food or beverage expenses to employees at an employer-operated eating facility. Furthermore, these expenses will be fully nondeductible after December 31, 2025.

The tax code permits an employer to make a tax-free award of tangible personal property to an employee for length-of-service or safety achievement. The TCJA tax reform states that tangible property does not include

• Cash, cash equivalents, gift cards, gift coupons, or gift certificates; or
• Vacations, meals , lodging, tickets to theater or sporting events, stocks, bonds, other securities, and other similar items.

As you can see, there are many employee fringe benefits affected by the Tax Cuts and Jobs Act (TCJA). Unreimbursed business expenses are no longer allowed. Moving expenses are only allowed for member of the military. With the new tax reform the employer can still provide tax-free qualified transportation fringe benefits to employees, except for qualified bicycle commuting reimbursements. The employer will not be allowed to deduct any commuting expense incurred for providing any transportation to travel between the employee's residence and place of employment unless it is for the employee's safety. The TCJA tax reform will also no longer allow a deduction to employers for entertainment and recreational expenses or deductions with respect to any facility used in connection with such activity. The rules for employer-operated eating facilities remain at only 50% deductible. The new TCJA tax reform puts limitation son what tangible property includes or does not include. Very much effort has been placed on the deduction allowance or disallowance of employee fringe benefits.

Depreciation rules have been improved by the Tax Cuts and Jobs Act (TCJA). Qualifying property place in service after September 27, 2017 is eligible for 100 percent bonus depreciation. However, bonus depreciation drops by 20 percent per year beginning in 2023 until is it is eliminated in 2027. It has always been that only new property placed in service can be depreciated. The new Tax Cuts and Jobs Act (TCJA) has changed that. Now you can depreciate 100 percent of used property too! The eligible assets are those that are 20 years or less and personal property and qualified improvement property for work done to the interior of a commercial building. This excludes costs related to the enlargement of a building, an elevator or escalator, or the internal framework of a building.

This is a very generous improvement because under the old law, there was a 50 percent bonus depreciation for property placed in service in 2017, 40 percent depreciation for property placed in service in 2018 and 30 percent for property to be placed in service in 2019.

Section 179 depreciation also permits expensing of assets for commercial property. The Tax Cuts and Jobs Act (TCJA) expands the annual section 179 limitation from $500,000 to $1 million. The phase-out begins at $2.5 million for qualifying assets placed in service. Section 179 did not include roofs, HVACs, fire protection, fire alarm systems and security systems, but not the JCJA rules include these newly depreciable assets. The new tax bill expands the definition of qualified real property eligible for section 179 expensing to include any of these.

The new tax law also significantly increases the amount of first-year depreciation that may be claimed on passenger automobiles used in business to $10,000 for the year in which the vehicle was placed in service, to $16,000 for the second year, $9,600 for the third year, and $5,700 for the fourth and later years in the recovery period.

The Tax Cuts and Jobs Act of 2017 dramatically improved the ability to take depreciation for real estate property. For example, property is eligible for 100% bonus depreciation is what real estate owners want to hear. The annual section 179 deduction for commercial property has been increased from $500,000 to $1 million is also music to a real estate investor's ear.

1. There are many changes that came about with the new administration. One of these is the increase of the Child Tax Credit signed into law by President Trump. It is quite simple really. The new amount for 2018 increases from $1,000 per child to

A. $5,000

B. $2,000

C. $500

D. None of the above.  

A. Itemized deductions, such as taxes, interest on home equity loans used for nonresidential purposes, medical expenses, and miscellaneous job and investment expenses.

B. Certain tax-exempt interest, accelerated depreciation, and incentive stock option benefits.

C. Both A and B above.

D. Incentive Stock options (ISOs).

3. The new deduction for pass-through businesses was created by the Tax Cuts and Jobs Act (TCJA) and this deduction can allow you to take a deduction for up to 20% on income from your sole proprietorship, partnership and other business such as S corporations that are pass-through businesses. The amount of the deduction that you can take for 2018 will vary depending on

A. The nature of the business activity and the total income of the owner.

B. The total payroll amount paid to employees.

C. How much property the business owns.

D. All of the above.

4. The kiddie tax will most likely apply until the year the child reaches age 24. For tax year 2018, the following is a requirement for the kiddie tax.

A. The child must file a tax return for the tax year.

B. The child's net unearned income for the year exceeds $2,100 income threshold for 2018.

C. Only the income that is below $2,100 will be liable for the kiddie tax.

D. The child may be liable for the kiddie tax only if the child is over 17 years or older.

5. The new Tax Cuts and Jobs Act also brought change to Section 529 plans. This 2018 tax change actually expands the benefits of 529 savings plans. Furthermore,

A. It allows 529 plans now to be used for kindergarten through 12th grade tuition.

B. 529 plans are tax-advantage investment accounts which were originally designed to help families pay for a college education for their child.

C. The new tax law, allows parents to use these same benefits to pay for their child's education which means that the parent would be able to send their children to private grade schools and high schools.

D. All of the above.

6. There has been a major change to the NOL carryforward and carryback rules and a new limitation on NOL utilization has been added. The following is this change.

A. Now there are amendments in section 172 that allow any carryback of NOLs.

B. In the new tax reform, NOLs are allowed to carry a NOL back to two years and a carryforward for twenty years.

C. The NOL is allowed to fully offset taxable income of the taxpayer to carryback to as many years as you like.

D. The new Tax Cuts and Jobs Act (TCJA) reform amendments allow indefinite carryforwards of these NOLs.