Important changes for 2018 tax year

 

The new tax laws called TCJA (Tax Cuts and Jobs Act) will come into effect for the tax year, 2018. The following are a list of some of the changes to federal tax law. California did not conform to the federal changes and so there are no changes to California tax law from the prior year.

 

2018 Tax Law Changes

The Standard Deduction has been increased to $12,000 for single; $18,000 for Head of Household and $20,000 for filing joint.

 

Itemized Deductions will have limitations:  The Tax Deduction is limited to $10,000.  This includes the state withholding and real estate taxes. The interest deduction is limited to mortgage interest on debt up to $750,000.  Equity line interest has to be traceable to purchase or improvements of the property. Charity is still fully deductible.  Miscellaneous Deductions have been eliminated.

 

Under the 199A regulations for "qualified Business income", a business owner may deduct up to 20% of net income.  This includes small business, LLCs; partnerships (not publicly traded) and S Corps.  No decision has been made by Congress for the IRA if rental property with income is included in this deduction.

 

Child Tax Credit is $2,000 each child.  The phaseout amount is much higher this year so higher income taxpayers may get this deduction

 

The Childcare Deduction is still available.

 

Personal Exemptions have been eliminated.

 

Alternative Minimum Tax (AMT) has a higher exemption phaseout and therefore it is estimated that 98% of taxpayers will owe no additional AMT tax.

 

The Annual Gift Exclusion is $15,000.

 

The ACA Mandate for the tax year, 2018 is still in effect.  The change to no mandate will happen in 2019.

 

The Business Mileage Deduction for tax year, 2018 is $.545.  Charitable Mileage is $.14 and Medical Mileage is $.18.

 

The Kiddie Tax on child's income for the federal is no longer.  The income is taxed on Estate and Trust rates.  California still has a Kiddie Tax.

 

The Estate Tax Exclusion is now $11,180,000.

 

The Electric Vehicle maximum credit is $7,500.

 

The Solar Energy Credit for property placed in service between 1/1/2017 to 12/31/19 the credit is 30%; for property placed in service 1/1/20 to 12/31/2020 the credit is 26% and for property placed in service 1/1/2021 to 12/31/2021 the credit is 22%.  Unless extended, the Solar Credit is finished 12/31/21.

 

No medical deduction for Medical Marijuana.

 


Tax tip: organizing your expenditures by category throughout the year will save time during tax season.

Copyright 2019

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