2017 – 2018 Tax Act
1991 to 2016 changes on veteran disability benefits: see retaining old tax returns here
2018 changes to carried interest: The underlying assets must be held for three years “with respect to certain partnership interests.” This change would result in hedge funds players paying more in taxes on gains since they trade assets more frequently. Private equity – angel investors, who hold their assets over a longer term, would be exempt.
2018 changes to business interest: Is generally limited to 30% of adjusted taxable income.
2018 changes to depreciation: 100% first year bonus depreciation on many business asset purchases (those placed in service after 9/27/2017 and before 1/1/2023). The state of CT does not allow this and instead uses 4-year straight-line (starting in the year after the year of acquisition) for the 100% bonus and 5-year straight-line for Sec 179 (starting in the year of acquisition). The 100% drops to 80% for calendar year 2023; 60% for 2024; 40% for 2025 and 20% for 2026. (Do not claim too much depreciation that it puts you into a loss. In such cases, often it is better to forgo a current year deduction, and save some for future years – because the self-employment tax often is higher when there is a current year loss, rather than have the depreciation deducted in the future. e.g. a future year depreciation deduction lowers self-employment tax, whereas a NOL carryforward does not do so)
2018 changes to SALT real estate property taxes: limited with other IRC §212 SALT (State and Local Taxes) to $10,000, but there is a possible loophole for co-op taxes. https://www.currentfederaltaxdevelopments.com/blog/2019/2/22/owners-of-shares-in-housing-cooperatives-may-escape-10000-limit-on-tax-deduction-due-to-drafting-error-in-tcja and a loophole for investment property taxes under IRC §164(a)(2) https://www.currentfederaltaxdevelopments.com/blog/2019/9/28/do-taxes-on-investment-real-estate-escape-the-10000-cap-it-seems-likely
2018 CT changes: CT enacted a new tax of 6.99% on the income of pass-through entities. 93.01% of this is a refundable tax credit to be used against the partners’ personal income tax and/or refunded. 30 other states have enacted their own work-arounds to the new $10,000 SALT deduction limitation. On August 23, 2018 the IRS released proposed regulations that outlaws these as political-based scams which were enacted by the various states in hopes of winning elections in November 2018. Then on September 5, 2018 the IRS released a “clarification” which says that business taxpayers may claim a tax deduction. But it is still silent as to if the refundable tax credit received by partners is taxable income or not.
2018 changes regarding §199A deduction for traders in financial instruments and other “specified service activities”: If net income for the years (excluding capital gains) is no more than $157,500 you may qualify for the extra 20% tax deduction (example: 20% of $150,000 = $30,000 tax deduction). If married filing jointly, the $157,500 is doubled to $315,000. If the above net income is higher, the 20% is phased out until it reaches zero at $207,500 or $415,000.
2018 changes regarding §199A deduction for traders in financial instruments: Hopefully information will be forthcoming to clarify if capital gains do not qualify for the 20% deduction, but Sec 475 ordinary gains will qualify. Clarification may be forthcoming to confirm that traders in securities, partnership interests, and commodities are “specified service activities” but perhaps that any other financial instruments are not limited in the same manner. Clarification as to the definition or meaning of “brokerage services” may be forthcoming too.
2018 changes to increase the §199A deduction: A higher “capital percentage” may be beneficial for certain trades or businesses. Therefore, it may be beneficial to purchase equipment, rather than lease it.
2018 changes with entertainment: The 50% deduction for entertainment with a client is no longer deductible.
2018 changes with meals: The 50% deduction for business meals may not be deductible any longer (to be determined) and the 100% §119 meals deduction may also be limited, subject to further clarification.
2018 changes with IRAs: Recharacterization of a conversion from a traditional IRA, SEP or SIMPLE to a Roth IRA is not allowed for conversions made after 12/31/17.
2018 changes for gamblers: Any deduction for gambler operating expenses and wagers made will now be limited to the amount of gambler winnings (such as W-2G or 1099 income).
2018 changes for NOLs: Net Operating Losses (NOL) may not be carried back and NOL carry forwards (for NOLs arising in a tax year beginning after December 31, 2017) are limited to 80% of your other net taxable income. NOLs arising in a tax year beginning before January 1, 2018 are not limited to 80%, rather they are still fully deductible.
Current year NOLs are limited to $250,000 (or $500,000 married filing jointly Sec 461(l)) Any amount in excess over this limitation is carried forward and limited to 80% as per above.
2018 changes for payroll withholding taxes: https://www.irs.gov/payments/tax-withholding
2018 changes for parents: https://www.irs.gov/individuals/parents
2018 changes for a “postcard size” Form 1040: https://www.irs.gov/pub/irs-pdf/f1040.pdf for 2018, but after a backlash from the public, much has been rolled back starting with 2019: https://www.irs.gov/pub/irs-dft/f1040–dft.pdf
2019 changes for withholding tax Form W-4 (teenage students normally enter “EXEMPT” on line 10)
Note: using typical IRS-speak even for the teenager’s first job, he had a right to a refund of all of last year’s WH, because there was no WH last year: https://www.irs.gov/pub/irs-dft/fw4–dft.pdf
2019 changes with divorce: Alimony deduction is disallowed for those occurring after 12/31/18. Earlier divorces may be modified to follow this same rule. Alimony agreements for persons who are already divorced before 2019 will be grandfathered in, but if their agreements are modified in 2019 or beyond, they could be subject to the new rules, too. If the modification states that it is to be governed by the new rules, then the new rules will apply. If the modification says nothing, however, the old rules will apply. Consequently, people should be extremely cautious when modifying divorce agreements in 2019 and beyond.
2019 changes with Obamacare: the individual shared responsibility penalty is reduced to zero.
A nice easier to read summary: Your Complete Guide to the 2018 Tax Changes
IRS Fact Sheet (FS) FS-2019-2, February 2019: Be Tax Ready – understanding tax reform changes affecting individuals and families
IRS News Release (IR) IR-2019-22, February 26, 2019: Tax Time Guide: Most people affected by major tax reform changes; Special publication, other online resources can help