On December 22, 2017, President Trump signed the first major tax reform in 31 years into law. The Tax Cuts and Jobs Act makes many changes to the tax code and every taxpayer is impacted.
A highlight of some of the changes are as follows:
Tax rates:Tax rates are reduced. The top rate is reduced from 39.6% to 37%. Lower rates are also reduced.
Exemptions and the child tax credit: The deduction for personal exemptions is eliminated. An expanded child tax credit will help make up for the loss of personal exemptions for some families. The credit is increased to $2,000 (from $1,000) for qualifying children under 17. For children 17 and older and for other dependents, the credit is $500.
Standard deduction: The new tax reform law doubles the standard deduction. The higher standard deduction ($12,000 for singles, $18,000 for heads of household, and $24,000 for married filing joint) means that fewer taxpayers will benefit from itemizing deductions.
Itemized deductions: Itemized deductions for all state and local taxes, including property taxes, are capped at $10,000. The limit on mortgage debt for purposes of the mortgage interest deduction is reduced from $1,000,000 to $750,000 for loans made after December 15, 2017. Loans made before December 15, 2017 are grandfathered at the $1,000,000 debt limit. The interest on home equity borrowing is no longer deductible. The threshold for medical expense deductions is lowered to 7.5% of adjusted gross income (from 10%) for tax years 2017 and 2018. Miscellaneous itemized deductions subject to the 2% of AGI limitation are not allowed. Miscellaneous itemized deductions lost because of the new law include employee business expenses, investment adviser fees, union dues, and tax preparation fees. Personal casualty losses are not allowed unless the losses were suffered in a federally declared disaster area.
Alimony:The new tax reform law eliminates the alimony deduction for agreements signed after December 31, 2018. Alimony income is not taxable for agreements signed after December 31. 2018. There is no change to the law for agreements signed before January 1, 2019.
Moving expenses: The new tax reform law eliminates the moving expense deduction and makes employer reimbursement of moving expenses taxable to the employee beginning in 2018.
AMT:The new tax reform law temporarily increases the alternative minimum tax (AMT) exemption for tax years 2018 through 2025. The increase in the exemption, as well as the elimination of major tax preferences (including exemptions, state taxes above $10,000 and miscellaneous itemized deductions), means that fewer people will be subject to AMT under the new law.
Roth IRA conversions: The new tax reform law repeals the special rule permitting re-characterization of Roth IRA conversions. A conversion of a traditional IRA to a Roth IRA may still be advisable, but once the conversion is completed, it can’t be undone.
These are just a few of the changes included in the Tax Cuts and Jobs Act. Your 2018 taxes will be affected; that’s guaranteed by the scope of the changes, but the degree of impact depends on your personal situation. Questions we can answer for you.
Will the new tax reform law help me or hurt me?
Is my withholding enough so that I won’t have any surprises next April 15th?
Is there anything I can do now that will make my taxes less under the new tax reform law?
Gardner & Billing CPAs, PLLC will be providing articles throughout the summer that discuss the new Tax Act and the resulting changes that may have an impact on you and your family. We encourage you to please call us at 406-436-2583 for answers and planning suggestions.
It seems like everyone is outside enjoying the springtime, so it might be hard to think about book work, but this is actually the perfect time of year to get your 2017 adjusting entries into QuickBooks or get some business consulting done. We can schedule on-site consulting to review your business cash flow management, office processes, business plan and what it will take to get you on track for 2018 to achieve your goals.
Powder River Chamber of Commerce will be sponsoring a Candidates Forum
at the High School Auditorium on May 24th from 7p.m. to 9p.m. The
candidates are those running for local government positions in the June 5th, 2018 election. Dave Gardner of Gardner & Billing CPAs will once again be the moderator of the event.
In order to accommodate
those unable to attend the forum, the Chamber will go LIVE via
Facebook. Just as those in attendance will have the opportunity to be
better informed, those attending live on Facebook will have the same
The Forum has proven to be a great opportunity for
candidates and the voters to better communicate about the issues facing
our community. We are looking forward to the event, and the
participation by the community in the process of electing our local
Check out the Chamber Facebook page for more details on the event or to post questions for the candidates to be asked at the forum!