By EDWARD McWILLIAMS //
In December 2017, the U.S. Congress passed, and President Trump signed, the Tax Cuts and Jobs Act of 2017, which will impact virtually all taxpayers in the United States.
Over the coming months, we will be regularly updating the Cerini & Associates 2018 Tax Change Blog to provide helpful and meaningful information on these tax-law changes, looking at specific provisions and new laws and how they will affect certain industries.
We will be pushing these changes out often through our Essential Bulletin and via our mailing lists, so please click here to sign up.
The first draft of the current law was originally circulated by House of Representatives members in November, with a U.S. Senate version coming in December. Click here to see our initial reactions to the U.S. House and U.S. Senate bills.
The two chambers reconciled and voted on the law in late December, with the majority of the provisions to be effective Jan. 1. During the reconciliation process, many changes occurred from the original bills and prior drafts, resulting in a lot of dated information and leaving taxpayers confused as to what the final laws actually entail. The speed of these changes was rapid and unprecedented, which only added to the confusion.
As of Feb. 9, the laws have been in effect for over a month, which has given us time to begin to digest and update our models related to these drastic changes. However, the story is very much incomplete.
While the laws have been passed, the regulations that help to guide their enforcement are still pending, leading to frustrating ambiguity and an inability to take meaningful action.
As the news laws’ regulations, forms and pertinent rulings from the IRS become available, we will be sure to post updates to our Tax Change Blog. The increased guidance should help answer many of the burning questions of both taxpayers and Cerini & Associates’ own Tax and Business Advisory Team.
For now, here are some brief summaries on the new laws, starting with major individual taxation changes:
• Reduction in Individual Income Tax rates
• Increase in AMT Exemption amount
• Elimination of the Individual Mandate
• Increase in Standard Deduction amounts
• $10,000 cap on State and Local Tax deductions
• Increased cap on mortgage interest deductions
• Elimination of miscellaneous deductions, including Unreimbursed Employee Expenses (including home office deductions)
• Elimination of Personal and Dependency Exemptions
• Increased Child Tax Credits
• Changes in the taxation of alimony
• Elimination of Moving Expense deductions
• Deferral of taxation on certain Options Exercises
And a brief summary of business taxation changes:
• Reduction of Corporate Income Tax rate to 21 percent
• Elimination of Corporate AMT
• Reduction of the Dividends Received Deduction
• A 20 percent deduction for Qualified Business Income on taxpayers’ personal returns
• Elimination of the Technical Termination Provisions
• Increase in Section 179 expensing
• Increase in Bonus Depreciation
• Change in definition and life of certain improvements
• Limitations on interest deductions
• 80 percent limit for Net Operating Loss deductions
• Elimination of Net Operating Loss Carrybacks
• Elimination of entertainment expense deductions
• Required capitalization and amortization of R&D expenses after 2021
• Increased availability of Cash Method accounting and non-requirement to use UNICAP or inventory accounting
As mentioned, we plan to cover these changes in greater detail – and any planning opportunities that may arise – in the coming months. We want to make sure that you are getting relevant, timely, accurate and actionable information.
Mr. McWiilliams, CPA, is manager of the Tax Business Advisory Practice at Bohemia-based accounting firm Cerini & Associates LLP.