Big tax changes have gone into effect in 2018. Thanks to the massive new tax cut that Republican lawmakers enacted late last year. I thought it would be good to highlight some of the key changes. Remember, changes are always opportunities. It is a chance to provide information to our clients and ask questions to see what type of help they really need. Here are some of the key changes:
- Individual taxes Standard deductions nearly doubled to $24,000 for couples, $12,000 for singles and $18,000 for household heads. Given these higher amounts, it is a sure bet that fewer people will itemize.
- Home Mortgages are nicked Interest can be deducted on up to $750,000 of a new acquisition on a primary and secondary residence, down from $1 million. The new limit generally applies to mortgage debt incurred after December 14, 2017. Older loans still get the $1 million cap. No write off is allowed after 2017 for interest on home equity loans for which the proceeds are used to buy a car, pay down credit card debt etc.
- The Medical Expense deduction is enhanced – Lawmakers chose to keep this popular write-off but they’ve also lowered the threshold AGI on Schedule A from 10% to 7.5%.
- The Child Tax Credit is doubled to $2,000 for each dependent under age 17.
- Estate Tax and gift tax exemptions have changed. Congress has doubled the lifetime estate tax exemption to $11,180,000. The rate remains at 40%. The annual gift tax exclusion for 2018 is $15,000 per donee.
- The new tax law dramatically reforms the taxation of businesses of all sizes. Regular Corporations (C Corps) will pay a flat 21% rate, down from the 35% top rate now. This lower rate is permanent and begins in 2018
There is so much more to know about the ever-changing tax environment. But with change comes an opportunity to serve. Take the time to familiarize yourself with the changes and reach out to your clients with the information they need. You will be glad you did.