Highlights of the 2017 Tax Cuts & Jobs Act

• March 2, 2018

CHANGES TO INDIVIDUAL RATES AND BRACKETS– lowered top bracket from 39.6% to 37%

• Married Individuals highest bracket starts at $600,000; Single Individual $500,000; Trust and estate $12,500
• NEW-Dependent children aged 18-24 in school must use trust rates not Parent’s rate
• Capital gains rates remain unchanged
• NEW-three year holding period for carried interest distributions, sales or redemptions for Long-term capital gains
• AMT thresholds increased

CHANGES TO INDIVIDUAL DEDUCTIONS

• Only deductions available: medical expense, Interest expense, charitable deductions and tax expense and business casualty loss
  • Taxes limited to total of $10,000; Mortgage debt for existing loans limited to $1,000,000 and New home purchase $750,000.  Cash contributions limit increase from 50% to 60% of adjusted gross income
• No longer deductible expenses-Alimony paid for and alimony received under divorce contracts entered after 2018, tax prep fees, employee business and investment expenses and other miscellaneous itemized deductions moving expenses; personal casualty theft loss except for federally declared disasters
• New 529 plans for elementary or secondary public private or religious schools.
• Like kind exchanges now limited only to Real property so fast-food restaurant franchise licenses and patents; aircraft, vehicles, machinery and equipment, railcars, boats, livestock, crypto-currency, artwork and collectibles are no longer eligible.
• Current year business operating losses including passive losses limited to $500,000 joint and $250,000 for other filers.  Anything in excess cannot offset capital gain or investment income.
• No carryback of Net operating business losses. Carryforward of future losses limited to 80% of taxable income.
• Increased limits for expensing capital assets up to $1,000,000 for new & used property.
• Non-owner of some private company employees may get up to 5 years to defer income on exercise of stock options or RSU’s.

CHANGES TO ESTATE TAX

• Life time gift & GST exemption-2018 $11,200,000 single & $22,400,000 married couples.  Will be adjusted for inflation each year.  
• Annual gift tax amount-2018 Increased to $15,000

CHANGES TO BUSINESS (SCHEUDLE C) AND PASS THRU ENTITIES

• NEW- 20% deduction for pass thru or Schedule C qualified business income done at individual level
• Limitation of business interest deduction limited to 30% of the business’s adjustable taxable income, exception for real estate companies who elect longer depreciable life for real estate.
• NEW-Taxpayer’s average $25 million gross receipts- can use cash method of accounting and don’t have to use UNICAP rules for inventory capitalization.

At GROCO, we assist high net worth clients and their families with wealth creation, family transfers, taxes and charitable giving. Please give me a call at 510-797-8661 if you need assistance or have questions on these new rules or would like to know how to make, keep and/or transfer your wealth.