new tax law Archives - Page 5 of 5 - Dustin Kern, CPA, P.C.

Can you deduct home office expenses?

Post author:admin
Post published:January 23, 2018
Post category:Business Personal Tax

Working from home has become commonplace. But just because you have a home office space doesn’t mean you can deduct expenses associated with it. And for 2018, even fewer taxpayers will be eligible for a home office deduction.

Changes under the TCJA

For employees, home office expenses are a miscellaneous itemized deduction. For 2017, this means you’ll enjoy a tax benefit only if these expenses plus your other miscellaneous itemized expenses (such as unreimbursed work-related travel, certain professional fees and investment expenses) exceed 2% of your adjusted gross income.

For 2018 through 2025, this means that, if you’re an employee, you won’t be able to deduct any home office expenses. Why? The Tax Cuts and Jobs Act (TCJA) suspends miscellaneous itemized deductions subject to the 2% floor for this period. (more…)

Meals, entertainment and transportation may cost businesses more under the TCJA

Post author:admin
Post published:January 23, 2018
Post category:Business Tax Tax Deduction

Along with tax rate reductions and a new deduction for pass-through qualified business income, the new tax law brings the reduction or elimination of tax deductions for certain business expenses. Two expense areas where the Tax Cuts and Jobs Act (TCJA) changes the rules — and not to businesses’ benefit — are meals/entertainment and transportation. In effect, the reduced tax benefits will mean these expenses are more costly to a business’s bottom line.

Meals and entertainment

Prior to the TCJA, taxpayers generally could deduct 50% of expenses for business-related meals and entertainment. Meals provided to an employee for the convenience of the employer on the employer’s business premises were 100% deductible by the employer and tax-free to the recipient employee.

Under the new law, for amounts paid or incurred after December 31, 2017, deductions for business-related entertainment expenses are disallowed. (more…)

Personal exemptions and standard deductions and tax credits, oh my!

Post author:admin
Post published:January 17, 2018
Post category:Personal Tax

Under the Tax Cuts and Jobs Act (TCJA), individual income tax rates generally go down for 2018 through 2025. But that doesn’t necessarily mean your income tax liability will go down. The TCJA also makes a lot of changes to tax breaks for individuals, reducing or eliminating some while expanding others. The total impact of all of these changes is what will ultimately determine whether you see reduced taxes. One interrelated group of changes affecting many taxpayers are those to personal exemptions, standard deductions and the child credit.

Personal exemptions

For 2017, taxpayers can claim a personal exemption of $4,050 each for themselves, their spouses and any dependents. For families with children and/or other dependents, such as elderly parents, these exemptions can really add up.

For 2018 through 2025, the TCJA suspends personal exemptions. This will substantially increase taxable income for large families. However, enhancements to the standard deduction and child credit, combined with lower tax rates, might mitigate this increase.

Standard deduction

Taxpayers can choose to itemize certain deductions on Schedule A or take the standard deduction based on their filing status instead. Itemizing deductions when the total will be larger than the standard deduction saves tax, but it makes filing more complicated. (more…)

New tax law gives pass-through businesses a valuable deduction

Post author:admin
Post published:January 8, 2018
Post category:Business

New tax law gives pass-through businesses a valuable deduction

Although the drop of the corporate tax rate from a top rate of 35% to a flat rate of 21% may be one of the most talked about provisions of the Tax Cuts and Jobs Act (TCJA), C corporations aren’t the only type of entity significantly benefiting from the new law. Owners of noncorporate “pass-through” entities may see some major — albeit temporary — relief in the form of a new deduction for a portion of qualified business income (QBI).

A 20% deduction

For tax years beginning after December 31, 2017, and before January 1, 2026, the new deduction is available to individuals, estates and trusts that own interests in pass-through business entities. Such entities include sole proprietorships, partnerships, S corporations and, typically, limited liability companies (LLCs). The deduction generally equals 20% of QBI, subject to restrictions that can apply if taxable income exceeds the applicable threshold — $157,500 or, if married filing jointly, $315,000.

QBI is generally defined as the net amount of qualified items of income, gain, deduction and loss from any qualified business of the noncorporate owner. For this purpose, qualified items are income, gain, deduction and loss that are effectively connected with the conduct of a U.S. business. QBI doesn’t include certain investment items, reasonable compensation paid to an owner for services rendered to the business or any guaranteed payments to a partner or LLC member treated as a partner for services rendered to the partnership or LLC.

The QBI deduction isn’t allowed in calculating the owner’s adjusted gross income (AGI), but it reduces taxable income. In effect, it’s treated the same as an allowable itemized deduction. (more…)

Most individual tax rates go down under the TCJA

Post author:admin
Post published:January 2, 2018
Post category:Personal Tax Deduction

The Tax Cuts and Jobs Act (TCJA) generally reduces individual tax rates for 2018 through 2025. It maintains seven individual income tax brackets but reduces the rates for all brackets except 10% and 35%, which remain the same.

It also makes some adjustments to the income ranges each bracket covers. For example, the 2017 top rate of 39.6% kicks in at $418,401 of taxable income for single filers and $470,701 for joint filers, but the reduced 2018 top rate of 37% takes effect at $500,001 and $600,001, respectively.

Below is a look at the 2018 brackets under the TCJA. Keep in mind that the elimination of the personal exemption, changes to the standard and many itemized deductions, and other changes under the new law could affect the amount of your income that’s subject to tax. Contact us for help assessing what your tax rate likely will be for 2018.

Single individuals

Taxable income	Tax
Not over $9,525	10% of the taxable income
Over $9,525 but not over $38,700	$952.50 plus 12% of the excess over $9,525
Over $38,700 but not over $82,500	$4,453.50 plus 22% of the excess over $38,700
Over $82,500 but not over $157,500	$14,089.50 plus 24% of the excess over $82,500
Over $157,500 but not over $200,000	$32,089.50 plus 32% of the excess over $157,500
Over $200,000 but not over $500,000	$45,689.50 plus 35% of the excess over $200,000
Over $500,000	$150,689.50 plus 37% of the excess over $500,000

(more…)

The TCJA temporarily expands bonus depreciation

Post author:admin
Post published:January 2, 2018
Post category:Business Tax Deduction

The Tax Cuts and Jobs Act (TCJA) enhances some tax breaks for businesses while reducing or eliminating others. One break it enhances — temporarily — is bonus depreciation. While most TCJA provisions go into effect for the 2018 tax year, you might be able to benefit from the bonus depreciation enhancements when you file your 2017 tax return.

Pre-TCJA bonus depreciation

Under pre-TCJA law, for qualified new assets that your business placed in service in 2017, you can claim a 50% first-year bonus depreciation deduction. Used assets don’t qualify. This tax break is available for the cost of new computer systems, purchased software, vehicles, machinery, equipment, office furniture, etc.

In addition, 50% bonus depreciation can be claimed for qualified improvement property, which means any qualified improvement to the interior portion of a nonresidential building if the improvement is placed in service after the date the building is placed in service. But qualified improvement costs don’t include expenditures for the enlargement of a building, an elevator or escalator, or the internal structural framework of a building. (more…)

Tax Cuts and Jobs Act: Key provisions affecting individuals

Post author:admin
Post published:December 26, 2017
Post category:Personal Tax Tax Deduction

On December 20, Congress completed passage of the largest federal tax reform law in more than 30 years. Commonly called the “Tax Cuts and Jobs Act” (TCJA), the new law means substantial changes for individual taxpayers.

The following is a brief overview of some of the most significant provisions. Except where noted, these changes are effective for tax years beginning after December 31, 2017, and before January 1, 2026.

Drops of individual income tax rates ranging from 0 to 4 percentage points (depending on the bracket) to 10%, 12%, 22%, 24%, 32%, 35% and 37%
Near doubling of the standard deduction to $24,000 (married couples filing jointly), $18,000 (heads of households), and $12,000 (singles and married couples filing separately)
Elimination of personal exemptions
Doubling of the child tax credit to $2,000 and other modifications intended to help more taxpayers benefit from the credit
Elimination of the individual mandate under the Affordable Care Act requiring taxpayers not covered by a qualifying health plan to pay a penalty — effective for months beginning after December 31, 2018, and permanent
Reduction of the adjusted gross income (AGI) threshold for the medical expense deduction to 7.5% for regular and AMT purposes — for 2017 and 2018
New $10,000 limit on the deduction for state and local taxes (on a combined basis for property and income taxes; $5,000 for separate filers) (more…)

Tax Cuts and Jobs Act: Key provisions affecting businesses

Post author:admin
Post published:December 26, 2017
Post category:Business Tax

The recently passed tax reform bill, commonly referred to as the “Tax Cuts and Jobs Act” (TCJA), is the most expansive federal tax legislation since 1986. It includes a multitude of provisions that will have a major impact on businesses.

Here’s a look at some of the most significant changes. They generally apply to tax years beginningafter December 31, 2017, except where noted.

Replacement of graduated corporate tax rates ranging from 15% to 35% with a flat corporate rate of 21%
Repeal of the 20% corporate alternative minimum tax (AMT)
New 20% qualified business income deduction for owners of flow-through entities (such as partnerships, limited liability companies and S corporations) and sole proprietorships — through 2025
Doubling of bonus depreciation to 100% and expansion of qualified assets to include used assets — effective for assets acquired and placed in service after September 27, 2017, and before January 1, 2023
Doubling of the Section 179 expensing limit to$1 million and an increase of the expensing phaseout thresh
old to $2.5 million (more…)