Great News for Pass-through Entities and Schedule C Filers:

 

MAZUR_BLOG_20pct

20% deduction for Qualified Business Income effective for tax years beginning on or after January 1, 2018 !

The Tax Cut and Jobs Act (TCJA) Code Sec. 199A provides a 20% deduction on Qualified Business Income (QBI) from: Sole proprietorships, S corporations, Partnerships, and LLCs that are taxed as partnerships. QBI is defined as the net amount of qualified items of income, gain, deduction, and loss concerning the qualified trade and business of the taxpayer. It does not include qualified REIT dividends or publicly traded partnership income. These are eligible for a separately calculated 20% deduction outside of QBI deductions. The Code Sec. 199A QBI deduction is a deduction available to both itemizers and non-itemizers, and most importantly, can be claimed by individuals on their personal tax returns as a reduction of their taxable income! This deduction is active for tax years beginning after December 31, 2017 and before January 1, 2026. It is applicable to estates and trusts as well.

According to TCJA Code Sec 199A, a taxpayer’s deduction for qualified business income for the tax year is equal to the sum of the lesser of the combined QBI for the tax year OR an amount equal to 20% of taxable income (which is reduced by any net capital gain and qualified cooperative dividends) PLUS the lesser of 20% of the qualified cooperative dividends OR taxable income reduced by net capital gain.

Combined QBI includes an amount equal to 20% of the total amount of qualified REIT dividends and qualified publicly traded partnership income of the taxpayer for that tax year.

Additionally, Code Sec. 199A provides a special deduction to specified agricultural or horticultural cooperatives. (If this applies to you, please call our office to discuss it further at (732) 936-1230.)

That is a lot of technical information to take in. Here is where we make it a bit easier for you, a business owner, partner, member or S corporation shareholder taxpayer, to understand. Below is the three-step simplified process for calculating your QBI deduction:
•  Calculate the QBI deduction of each of the qualifying trades or businesses
–  The deductible amount for each qualified trade or business is the lesser of 20% of the taxpayer’s QBI OR the greater of 50% of the W-2 wages OR the sum of 25% of the W-2 wages and 2.5% of the unadjusted basis, immediately after obtaining all qualified property.
–  The W-2 wage limitation is applied when calculating the QBI deduction and therefore the W-2 wages do not include any amount that cannot be properly allocated to the QBI as a qualified item of deduction AND any amount that was not properly included in a return filed with the Social Security Administration on or before the 60th day after the due date (including extensions). **These limitations exclude those in the health, law, accounting, broker, actuarial science, preforming arts, consulting, athletic, and financial services, deeming them not qualified trade or business.**
•  Calculate the combined QBI amount
–  Take the sum of the deductions from step 1, adjusted for any carryover qualified business loss (which means reduced by 20% of any carryover or loss but not reduced below zero) and add that to 20% of the total amount of the REIT dividends and qualified publicly trades partnership income.
•  Determine whether the taxable income limitation applies
–  There are caps on the QBI deduction at 20% of the taxable income. This makes the final deduction equal to the lesser of the combined QBI amount found in step 2 OR an amount equal to 20% of the taxpayer’s taxable income once it is reduced by any net capital gain.

Note that this deduction is not used in calculating adjusted gross income, thus it does not affect limitations based on adjusted gross income.

This 20% deduction is quite significant for the S Corporation shareholders, partners/members in partnerships, Limited Liability companies or Schedule C filers. The QBI deduction could reduce your individual marginal tax bracket or reduce your AGI so that you are now eligible for tax credits. One thing is for certain: if your business or K-1 has positive income, is not one of the “specified service trade or business” mentioned above, the QBI deduction will DEFINITELY reduce your federal income tax bill on your 2018 tax return!

For calendar year entities, tax planning before December 31st is a must! Make sure you take advantage of our tax planning expertise as soon as possible by calling and making an appointment to help your company maximize its tax savings. We are available Monday through Friday, 8:30 AM to 5 PM, at (732) 936-1230. We at Mazur and Associates look forward to hearing from you and helping you create the best and most tax efficient plan plan possible for the 2018 tax year!

Advertisements

Small Businesses and Cybersecurity

MAZUR_BLOG_Cybersecurity_2018

Cybersecurity breaches in the United States are the most expensive and the top cyber threats are as follows:

• Ransomware & similar deception tactics
– Cyber criminals use information illegally obtained to blackmail a victim, threatening to release the information if they are not paid a ransom.

• Social Engineering
– Phishing- Fabricated emails claiming to be from legitimate sources looking to obtain personal information from victims via email exchange or via a link in the email.
– Spear Phishing- Highly customized or personalized phishing emails attempting to gain immediate personal information to payment.
– Baiting- Malware placed within media and graphics on websites and other online platforms (Like clickbait)
– Tailgating- Predator physically follows a person into a restricted area and gains access to private information

• Password Attacks
– Cyber criminals have password cracking software readily available to them and use it to hack private passwords in order to gain access to personal accounts /devices and information stored within them

• Man in the Middle (MITM)
– Cyber criminals secretly intercept communication between two legitimate parties, sometimes impersonating the other party on both ends on the communication in order to gain information or alter communication between the two.

• Denial of Service (DoS)
– Cyber criminals overwhelm websites with high volumes of traffic or data in order to disrupt the availability of the website to legitimate users and handicap the network.

Cybersecurity is increasingly important to every business in this technological age. Below you will find some advice on how to keep your business safe from cybercriminals and attacks.

Train your employees to practice basic security measures when online. Require strong passwords and create a policy that outlines appropriate Internet use, including penalties for violating the cyber security policies and direction on how to handle and protect customer and company information and data online.

Ensure your electronic equipment is safe by using the latest security software, web browsers, and operating systems. This is the best defense against online threats like viruses and malware. Antivirus software is also necessary. It scans a computer or machine for viruses each time the system is updated.

Your internet connection should always be protected by a firewall (a set of programs that prevent someone outside of the company from accessing the data on your private network). If your operating system comes with a firewall, make sure it is enabled. If your operating system has no firewall to enable, there are sufficient firewall programs and software available for download online. If you have employees that work from home or on a personal device like a laptop or tablet, make sure that their system(s) are also using an up to date firewall software.

In your cybersecurity policy, include a clause for personal mobile devices. Require password protection, encryption of data, and installation of security apps to prevent cybercriminals from stealing information while the device, like a phone, is connected to a public network. Add in procedures for reporting lost or stolen devices with data on them as well.

To ensure that there is never a loss of information due to a breach in cyber security, make sure all important data and information is backed up and or copied from all business devices. This includes word processing documents, spreadsheets, databases, financial files, human resources files and accounts payable and receivable. If an automatic backup setting is available, that is the best option to choose. If not, make sure you back up your data once a week at least and store the copies either offsite or in the cloud.

Limiting physical access to devices with sensitive information is another way to prevent cybersecurity breeches. Do not allow nonemployees to use computers or other devices in your office space. Make sure all personal devices like laptops and phones are locked when left unattended. Each employee should have their own unique username and strong password to log into the company server. And only one trusted employee or IT staff member along with key personnel should be given administrative access on your network.

Your Wi-Fi, if you have it, should be secure, encrypted, and hidden. There should be a password required to use your companies Wi-Fi server and set up your router so that it does not broadcast the network name or the Service Set Identifier (SSID).

Secure your payment and credit card information by working with your banks and processors Make sure that the best tools and anti-fraud services are being used. Payment tracing systems should be kept separate from other systems. For example, do not use the same computer to process credit card payments and to browse the web for leisure or for things unrelated to processing payments.

To limit access to data and information is to limit the abilities of cybercriminals. Employees should only have access to the data systems they need to do their jobs and should not be able to download any software without administrative permission.

Be aware of what is posted on social media platforms as well. Cybercriminals have developed ways to get public information about you personally or your business from social media domains and use it to create highly personalized phishing schemes that are hard to spot. Sometimes users are not even aware that what they are posting is publicly available.

Using your own email domain and maintaining control over it within the business is a helpful security measure. It is recommended not to use Yahoo, Google, Bing, and other public domains for business accounts.

Lastly, require employees to use unique passwords that are to be changed every three months or so. A multifactor authentication that requires additional information to access a computer may also be helpful in cybersecurity. Some vendors who handle sensitive data, such as financial institutions, offer multifactor authentication account options.

Securing your personal information and Company data is of utmost importance in today’s tech-driven business environment. At Mazur & Associates we have relationships with firms who are experts in this field. Please contact us for a referral to an IT specialist who can assist you or your Company.

Although the summertime is upon us, be reminded that we are already in the second half of 2018. It is not too early but instead, prudent to contact us now to take advantage of our tax planning expertise! Call us for an appointment today. We are available Monday through Friday, 8:30 AM to 5 PM, at (732) 936-1230. We at Mazur & Associates, CPAs are here to assist you and design an income tax-savings plan for the 2018 tax year!

Time to Think About Paid Time Off

MAZUR_BLOG_Paid Tiome Off 2018

On May 2, 2018, Governor Murphy passed the first state-wide paid sick leave legislation in New Jersey. This new law clearly outlines new uniform requirements for paid sick leave and time off policies that New Jersey employers must comply with. The statute becomes effective on October 29th, 2018. All existing paid time off policies must now meet the minimum requirements of the new law and those employers without one must create one to comply with the requirements outlined. We at Mazur and Associates understand that for small businesses it is often difficult to keep up with the ever-changing legal requirements, so we have outlined and highlighted the parts of the bill that affect employers and employees alike.
• All New Jersey employers, regardless of size, must give one hour of paid sick leave per every 30 hours worked by each covered employee, even if they are a temporary employee.
– Exclusions include: Construction workers with collective coverage, healthcare and public employees with paid sick leave benefit packages
• Employees can accrue up to 40 hours of paid sick leave per benefit year
– A “benefit year” is a 12 month period set by the employer. Once a benefit year is established, it cannot be changed without going through the Commission of the Department of Labor and Workforce Development regulation.
• Employers can “front load” and pay employees their yearly 40 hours sick leave in advance at the beginning of the benefit year
• Employees hired on or before the effective date may start accrual on the effective date (October 29th, 2018)
• Employees hired after the effective date start accrual upon employment
– Employees, whether they were hired before or after the effective date, may not use their sick time until 120 days after the effective date.
• Employees can carry over up to 40 hours of paid time off from one benefit year to the next.
• Employers can “buy back” paid sick leave hours from employees
– Employees can accept full or half of the payment equal to their accrued paid sick leave at the end of the benefit year and have any remaining hours roll over into the next year.
• Approved reasons for taking paid time off are:
– Diagnosis, care, or treatment for: personal mental or physical illness, a family member’s* mental or physical illness, domestic abuse or sexual violence suffered by the employee or a family member.
– Time off needed because: the employee is not able to work because of the closure of the employee’s workplace, or the school or daycare of a child of the employee, the employee must attend school-related conferences, meetings, functions or other events requested or required by a child’s school, or to attend a meeting regarding the care provided for the child’s health conditions or disability
*A family member is a child, grandchild, sibling, spouse, domestic partner, civil union partner, parent or grandparent of an employee or a spouse, domestic partner, civil union partner or a parent or grandparent of the employee, or a sibling of a spouse, domestic partner or civil union partner of the partner under this new law.
• If the reason for taking paid time off is foreseeable or planned, employers may require up to seven (7) days’ notice and the employee must make their best effort not to disrupt the employers operations with the timing of their absence.
• If the reason for taking time off is not foreseeable, notification of leave is required as soon as possible.
• If leave is three (3) days or more in a row, employers may require documentation to prove that the paid time off is being used lawfully and for one of the approved reasons.
• Employers are not required to pay accrued hours to employees upon termination. Resignation, or other forms of separation from work and the business.
• Employers are required to keep documentation of hours worked and hours of sick leave taken for five years.
– If records are not kept, it is assumed that the employer is non-compliant with the law.
• Employers must distribute materials on the new requirements concerning paid time off provided by the Commission of New Jersey Department of Labor and Workforce Development.
• Employees who file and win civil court cases against an employer who was not compliant with the New Jersey Wage and Hour law are entitled to double damages.
• Employers can not retaliate against an employee for using his or her sick hours
– For example, counting a paid sick day as an absence from work that results in disciplinary action is not allowed
• Employers cannot take action against an employee within 90 days of said employee
– filing a complaint alleging a violation
– reporting or cooperating with any person investigation a violation
– opposing any unlawful policy or practice under the act
– informing any individual of their rights under the act
• Employees are entitled to their accrued hours even if employers change during the benefit years.

Our suggestion to all employers is to review your current paid sick leave policy or other paid time off policies in place to ensure that they meet the minimum requirements of the earned sick leave act. Employers with a separate sick and vacation leave policy might want to think about using a Paid Time Off bank in order to lessen some of the impacts the new requirements can have on the administration. Those without a policy on paid sick leave must create and implement a new policy that complies with the new act before the effective date.

At Mazur and Associates, Certified Public Accountants and Business Advisors, we have the business management expertise to guide your Company! We would be pleased to discuss some planning ideas that your Company may consider implementing before the law’s effective date of October 29, 2018. Call us at (732) 936-1230 to schedule a consultation with one of our CPA-Advisors.

Not taking action by October 29th would be a huge mistake!

A Well-Planned Retirement — Free From Financial Worry

MAZUR_BLOG_Retirement_2018

A well-planned retirement is a comfortable and happy retirement. Living out your golden years without financial worries is the goal, and Mazur & Associates has some advice on how to get yourself there.  Most people miss out on the potential tax benefits from funding a qualified retirement plan.  Don’t worry though, it is not too late to reduce your 2017 tax liability if you take action before April 17, 2018.

Before you start strategizing, it is important to understand the basic differences in some of the most common retirement accounts.

Employer Types
• 401(k): This type of retirement plan is sponsored by an employer.  As a worker, you can save and invest a piece of your salary before taxes are withheld and drops your taxable income by the amount you contribute.  You will pay the income taxes on contributions and earnings upon withdrawal from the account.  You can contribute up to $18,000 this year, and for those aged 50 or older you can take advantage of the catch-up contribution, which allows an additional $6,000, bringing the total yearly contribution to $24,000. If you have a SIMPLE 401(k), you can contribute up to $12,500 and $15,500 if you are over 50 years old.

• 403(b): Also known as a tax-sheltered annuity plan, these plans are usually used by employees of educational institutions or non-profit organizations.  This plan is similar to a 401(k). You make pre-tax contributions, the funds grow tax free, and taxes are paid upon withdrawal.  Contribution limits, including catch-ups, are the same as 401(k) plans.

Individual Types
• Individual Retirement Account (IRA): An IRA can be opened by anyone who has earned income.  There are two types of IRA plans:  traditional and Roth. With both your funds grow tax free.  For 2017, you can contribute the maximum $5,500 to either IRA ($6,500 if you are age 50 or older by the end of last year) and this contribution must be made by the tax filing deadline:  April 17, 2018. For traditional IRA’s you must start withdrawing money from the account by age 70½.  If you withdraw from an IRA account before reaching age 59½ you may also be assessed a 10% premature distribution penalty (there are exceptions, such as first-time homebuyer, college tuition for you or any of your dependents, etc.). If you have a traditional IRA and are active in your retirement plan, there are ranges of phase outs based on your filing status. For the 2017 tax year there exists a phase out range of $186,000-$196,000 for a married individual who is not an active participant in a retirement plan at work and files a joint return with a spouse who is an active participant. If your income exceeds this range then your contribution to a traditional IRA is non-deductible.

There are special rules for contributions to ROTH IRAs. With a Roth IRA, you get no tax deduction when you contribute and you can leave the money in the account for as long as you want. Roth IRA distributions will generally be tax free and will not be added to your income in the year of withdrawal. If you are filing as single or as the head of the household, your range is $62,000-$72,000. If you are married filing jointly or single status/qualifying widow/widower, your range is $99,000-119,000. If you are married filing single your range is $0-$10,000. If you have a Roth IRA plan and are filing as single or as the head of the household, your range is $118,000-$133,000. If you are married filing jointly or as single status/qualifying widow/widower, your range is $186,000-$196,000. Married filing single has the same range as a traditional IRA plan with that filing status. You cannot contribute to a Roth IRA if your income is above those levels.

If you already have a traditional IRA, you may want to consider converting it to a Roth IRA this year since 2017 is the last year this recharacterization is permitted (The Tax Cuts and Jobs Act legislation prohibits conversations to ROTH IRAs beginning with tax year 2018). Taxpayers are taxed on the amount exchanged as ordinary income but investments made after that and future earnings in the ROTH account will be free of tax. Traditional 401(k), 403 (b) or 457 plans that include after-tax contributions generally roll over these after-tax amounts to a Roth IRA with no tax consequences. Rollover to a SIMPLE 401(k) is also possible. If you are considering this, you should immediately schedule a meeting with us, before you take any action, to prevent any unintended circumstances, including a surprise tax bill!

Choosing among the various retirement plans can be confusing and that is where our savvy tax guidance comes into play.  We at Mazur and Associates Certified Public Accountants and Business Advisors, PC possess the knowledge and expertise to assist you in this area.  We will counsel you on how to save income tax on your 2017 tax returns while at the same time increasing your financial security upon retirement.  Call us today at (732) 936-1230 to schedule an in-person tax consultation with one of our seasoned CPA staff!

High Turn Over Rate? Try Focusing on Balance!

MAZUR_BLOG_GRAPHIC_work-life_2018

Work-life balance. It is a buzz term for sure, but not everyone has a full grasp on what it means or how to achieve it. As a supervisor, fully understanding this concept can help not only you, but your workplace. Maintaining a healthy work-life balance has a direct & positive impact on productivity and job satisfaction. This prosperity encourages employees to commit to a company for the long term, reducing burn out and turnover rates. Here is a list of things that you can do as a supervisor to help your employees achieve and maintain this healthy work-life balance.

• Communicate
• Ask your employees about their wants and needs. That is the best way to get to know them and what aid they may need to achieve a healthy work-life balance.
• If some employees feel uncomfortable verbalizing their needs, you can provide an anonymous questionnaire to attain the same information.
• Don’t forget about the tenured staff!
• Multigenerational staff is hard to stay in tune with. Different ages have different needs and different balances. Be sure not to forget about your tenured staff.
• Outcomes Over Hours
• Reward good outcomes rather than sacrificing personal time and putting in extra hours. This will ensure that employees don’t burn themselves out with extended hours as well as shift their focus to time management and outcomes in a timely manner.

• Lead by Example
• Let employees enjoy their personal time. That means no emails on weekends or days off!
• Paid Time Off
• Encourage workers to use their paid time off to enjoy their personal life and take a mental break.
• Consider stopping roll over vacation if you haven’t already. This eliminated the option to accumulate and save days, forcing those work-a-holics to take a much-needed break to avoid burning out.
• We are all Human
• Everyone has limits, both mental and physical. Be aware that everyone has different limits on what they can handle without being overwhelmed. Be in tune with our staff and make adjustments based on your observations.
• Try to distribute work evenly among your staff. With all the new technology advancements, lower and middle tier jobs have become obsolete, leaving senior staff with a lot more work to do than some may realize. Keep this in mind when assigning projects.
• Interim Professionals
• Hire enough help to aid full time staff to stay on top of their work if your business is subject to cyclical “peaks and valleys”.
• Hiring extra help year-round will also help with keeping your business operational while full time staff takes their well-deserved breaks.

• Time is a Gift
• Consider giving an extra day off, or even an afternoon off after the completion of a big project as a reward.
• Extending a holiday break could be beneficial too. For example, if there is typically a lull at the office the week between Christmas and New Year’s, try closing the office. This way your employees come back ready to get to work after a relaxing break.
• Education
• Promote achieving a healthy work-life balance in emails, memos, or letters to staff.
• Provide resources for different demographics represented in your office. For example, give material on how to balance your work life and personal life as a new parent if you have someone coming back from maternity/paternity leave.
• Try to hold a lunch where you can facilitate discussions about your staff’s balance.
• Make sure you have a clear and comfortable open-door policy so that your employees feel comfortable talking to you about what they need.
• Don’t limit yourself
• As a supervisor, you may be clouded by your own personal type of work-life balance. Not everyone has the same balance. For example, a working parent has different personal needs than a single employee, or one with parents that need help on a regular basis.

We at Mazur & Associates, Certified Public Accountants and Business Advisors are here to guide you. We are available by telephone and email, so please call (732) 936-1230 or email steve@mazurcpas.com to schedule an appointment today!

Follow the Law, File Your 1099 Forms!

MAZUR_BLOG_1099

Attention all business clients, nonprofit organizations, and rental property owners! If you are filing a Schedule C/C-EZ, E, or entity tax return (1065, 1120, 1120S) then this article is for you. The following information will help you avoid steep penalties from the IRS due to misfiling your 1099 forms. ***Note that the filing dead line for 2017 nW-2s and 1099s is January 31, 2018.***

• 1099 forms are not optional, sending them is required BY LAW.
• These forms are used to report specific income types from sources of non-employment that may not be reported anywhere else.
• Employees do NOT need a 1099, that is what a W-2 is for.
• Determine whether or not you have a trade or business.
• If you are working to make a gain or profit, even if you are an independent contractor, you have a trade or business.
• If you run a non-profit, government agency, or a trust (of a qualified person or profit sharing employer plan) you have a trade or business.
• 1099-MISC are NOT for people you make personal payments to.
• If the payment is not related to your trade or business, there is no need for a 1099-MISC.
• Credit card payments do NOT require a 1099. These payments are reported in Form 1099K, which is provided by a merchant services provider.
• Review all disbursements made from January 1, 2017 through December 31, 2017. Summarize all payments to non-employee individuals and businesses that accumulate to $600 or more.
• Nonprofit organizations are required to do this as well.
• LLCs that elected to be treated as an S or C Corporation do NOT need to be given 1099s.
• If you are unsure about the status of a particular establishment (corporation or not), it is suggested to issue a 1099 as a precaution to avoid steep penalties.
• If you fail to file the correct information the deadline, do not include all necessary information, or file inaccurate information, there WILL BE PENALTIES.
• If you do not provide you taxpayer identification number (TIN), you may face backup withholding at a 28% rate.
• If you do not collect and pay back up withholding from the affected payees, you may become responsible for the uncollected amount.
• Employee business expense reimbursements are reported under a non-accountable plan as wages on Form w-2, not on Form 1099-MISC.
• A recommended policy is to require all vendors to complete and provided a W-9 before payment is administered.
• This way you can easily determine if they need a 1099 and how it should be issues if necessary.
• Directors’ Fees and other remuneration (including payments made after retirement) are reported in Box 7 of Form 1099-MISC for the year the payment was made.
• Firms maintaining trust or escrow accounts must review these types of payments.
• 1099s should be issues for payments out of these trust accounts, disbursements for interest, rentals, contracted services (that are not for employees), part-time employees that do not receive a W-2, commissions, maintenance/cleaning service individuals, etc.
• Forms 1099 are required for individuals, partnership, LLCs, etc.
• Just because the payment is made to a “company”, do not assume that it is a corporation
• The IRS has a special manual specifically for auditing lawyers! It focuses on lawyers not issuing 1099s to independent contractors out of an attorney’s trust account.
• The argument that the funds belong to the contractor does not exempt the lawyer from reporting the payments in a 1099.
• 1099s are rewired to be filed for payments to recipients of lawsuits unless specifically exempt from taxation.
• Payments to attorneys for legal fees that amount to $600 or more should be reported in Box 7 of Form 1099-MISC, regardless of whether or not the attorney is incorporated. Box 14 is where you report payments or gross proceeds paid to an attorney (i.e. Settlement agreements) ***unless the attorney’s fees are reportable in Box 7.
• It is suggested to have 1099s prepared by your staff or payroll service, however it is also recommended to have an outside source review all tax year expenditures to ensure no mistakes are made.
• Amounts reported in Box 7 are subject to self-employment tax. If payments made to individuals are not subject to self-employment tax and are not reported elsewhere on Form 1099-MISC, report them in Box 3.

If you or your business fails to file 1099s correctly by the due date and cannot provide reasonable cause, you may be subject to penalties such as those outlined above. These penalties apply if you miss the filing deadline or if you fail to provide complete and correct information on the 1099. They could also apply if you file on paper when you were required to file electronically or if your paper documents are not machine readable. You could also be penalized for not reporting your correct TIN.
BE AWARE! Time is of the essence when discussing 1099 filing because the deadline (January 31, 2018) is fast approaching!!
Mazur and Associates has the expertise to keep you out of trouble with the IRS! We are available by telephone and email, so please call (732) 936-1230 or email steve@mazurcpas.com to schedule an appointment today!

Tax Cuts and Jobs Act of 2017

MAZUR_BLOG_Tax Cuts

Individual Tax Provisions

New Tax Rates/Brackets (Effective 2018-2025)
• Seven brackets for individuals:
–  10%
–  12%
–  22%
–  24%
–  32%
–  35%
–  37%

• Personal Exemption Deduction is eliminated (Effective 2018-2025)
• Standard Deduction increases to $24,000 for Married Filing Joint, $18,000 for Head of Household, $12,000 for all other taxpayers (Effective 2018-2025 with future inflation adjustments)
• Itemized deduction for state and local taxes limited to $10,000 (Effective 2018-2025)
• Child Tax Credit Increased
• From $1,000 to $2,000)
• Eliminated Deductions (Individuals)
• Charitable Contribution Deduction for College Athletic Seating Rights
• No charitable deduction to a college or institution for higher education will be allowed to be exchanged for the right to purchase tickets/seating at an athletic event.
• Casualty and Theft Loss Deduction
• Personal casualty losses incurred in a federally declared disaster are exempt from this elimination.
• Miscellaneous Itemized Deductions (tax preparation, investment advisory fees, etc.)
• Alimony Deduction by Payor and Income Inclusion by Payee
• Alimony and separate maintenance payments are no longer deductible for the payor spouse and not included in the income of the payee spouse.
• Moving Expense and Reimbursements
• Active members of the Armed forces moving due to military order or change of station are exempt from this elimination.
• Education Incentives
• Taxpayers who pay tuition to a college or university may be eligible for a Lifetime Learning Credit, a Hope Credit, or an American Opportunity Tax Credit, depending on the circumstances.
• Employers may pay up to $5,250 on behalf of an employee to obtain work-related education without the payment being included in the taxable income of the employee.
• PhD candidates and dependents of college or university employees may receive tax free tuition waivers
• A deduction for student loan interest of up to $2,500 is available
• 529 accounts can be used to pay for private elementary and secondary school expenses
• Tax free treatment of 529 withdrawals for elementary and secondary schooling is limited to $10,000 per student per year.
• Alternative Minimum Tax (AMT)
• Increased exemption amounts
• $109,400 for married couples for tax years 2018-2025 compared to $84,500 in tax years prior.
• Less taxpayers will fall within AMT
• AMT credit is refundable and can offset regular tax liability equal to 50% of the excess of the minimum tax credit for the year over the amount of the credit allowable for the year against regular tax liability for 2018-2021
• Tax years beginning in 2021 50% turns to 100%
• Exclusion on Sale of Primary Residence
• Taxpayer may exclude up to $250,000 of gains ($500,000 married filing jointly)
• Must have owned/rented property and used it as the primary resident for two of the previous five years
• Affordable Care Act
• Individual “shared responsibility payment” is reduced from $695 to $0.
• RECHARACTERIZATION OF ROTH CONVERSIONS ELIMINATED
• Estate and Gift Tax Retained with Increased Exemption Amount
• Doubled the base estate and gift tax exemption (from $5 million to $10 million)

Corporation, Pass-through entities and unincorporated businesses Tax Provisions

• C Corporation Tax Rates
• Lowered tax rate to a flat 21%
• Applies to personal service corporations as well
• Dividends Received Deduction
• If a corporation owns 20% or more of another, a 65% dividend received deduction is allowed (no longer 80%)
• Less than 20%, a 50% deduction is allowed (no longer 70%)
• Section 179 (Expensing and Depreciating Property)
• Maximum deduction is now $1 million
• Section 179 property includes some personal property used to improve non-residential property (roofs, security system, HVAC, etc.)
• Immediate Expensing of Qualifying Business Assets
• 100% first year deduction for qualified property bought and used after 9/27/17 and before 1/1/23
• 80% for 2023
• 60% for 2024
• 40% for 2025
• 20% for 2026
• Shortened Recovery Period for Real Property
• Qualified leasehold improvement, restaurant, and retail improvement property are now treated the same
• General 15 year recovery period for all qualified improvement property
• Recovery period for residential rental property is now 30 years rather than 40.
• Interest Expenses
• All businesses will have a net interest expense disallowance.
• Net interest expense over 30% of the company adjusted taxable income will be disallowed.
• Taxpayers with an average annual gross receipts for the past three years of $25 million or less are exempt
• Net Operating Loss (NOL)
• Deduction is limited to 80% of taxable income
• Can be carried forward indefinitely
• No more two year carry back rule
• Like-kind Exchanges (Section 1031)
• Now only applies to real property that is not held primarily for sale
• Research and Experimental Expenses
• Required specific R&E expenses to be capitalized and amortized ratably over five years (includes cost for software development)
• Deductions for Fringe Benefits
• Deductions for entertainment expenses are completely disallowed
• Business meals deduction allowed, subject to the 50% limit on deductibility now include those provided in an in-house cafeteria or on employer’s premises
• No deduction for employee transportation fringe benefits
• No deduction for transportation expenses that are equal to communizing for employees
• No employer deduction for meal expenses provided on business premises
• New Credit for Employer paid Family and Medical Leave
• Businesses can claim a general business credit equal to 12.5% of the wages paid to qualifying employees during any period when that employee is on family or medical leave if the rate of payment is 50% of the wages normally paid.
• Credit increased by .25 percentage points for each point that the rate of payment is over 50%.
• All qualifying full time employees have to be given at least two weeks of annual paid family and medical leave.
• Expansion of Cash Method Accounting
• The cash method can be used by tax payers that pass the $25 million gross receipts test (regardless of whether the purchase, production, or sale of products is an income generating factor).
• Not required to account for inventories
• Treat inventories as nonincidental materials or conform to their financial accounting treatment of inventories
• Eliminated Deductions (Business)
• Domestic Manufacturing Deduction (Section 199) repealed for tax years after 12/31/17

New Deductions
• Business Income from Pass-through Entities and Sole Proprietorships
• An individual may deduct 20% of qualified business income from a partnership, S corporation, or sole proprietorship but it cannot be included in computing Adjusted Gross Income.
• Can be used as a deduction reducing taxable income
• Deduction cannot exceed 50% of your share of the W-2 wages paid by the business.
• Can be computed at 25% of your share of the W-2 wages plus 2.5% of the original purchase price of property used in the production of income.
• W-2 limitations do not apply if you earn less than $157,500 (single) or $315,000 (married filing jointly).
• Some personal service businesses are not eligible for the deduction
• Services in the fields of health, law, consulting, athletics, financial services, brokerage, investment, investment management trading, security, etc. are not eligible
Limits Imposed/Adjusted/Increased/Eliminated
   • Standard Deduction (Increased)
• Married Joint Return- $24,000
• Head of Household- $18,000
• All Other Taxpayers- $12,000
    • State and Local Tax Deductions
• Taxpayer’s itemized deduction for state and local taxes is limited to $10,000 of the aggregate of state and local property taxes and state and local income, war profits, and excess profits taxes paid or accrued in the tax year. ***an individual may not claim an itemized deduction in 2017 on a prepayment of income tax for a future tax year in order to avoid the dollar limitation applicable for tax years beginning after 2017.
    • Mortgage and Home Equity Indebtedness Interest Deductions
• Deduction for interest on home equity indebtedness is eliminated
• Deductions on mortgage interest is limited to underlying indebtedness of up to $750,000.
    • Charitable Contribution Deduction Limitation (Increased)
• Cash contributions to public charities and some private foundations has increased from 50% to 60%.
• Contributions over 60% can be carried forward and deducted for up to five years based on the later year’s ceiling.
    • “Pease” Limitation on Itemized Deductions (Eliminated)
• High-income taxpayers who itemize their deductions no longer have a limitation
    • Luxury Automobile Depreciation Limit (Increased
• Max depreciation increased to $10,000 for the placed-in-service year
• Max depreciation $16,000 for second year
• Max depreciation $9,600 for the third year
• Max depreciation $5,760 for the fourth year and on