What’s new: Tax Cuts and Jobs Act

(Part 3)

1. Amusement, recreation, and entertainment are now non-deductible under the new act. Businesses may still claim 50% deduction on meals if 1) provided to potential customer or client 2) not extravagant 3) the employer or employee is present 4) purchased separately from entertainment events. You may rely on Notice 2018-76 until the Department of Treasury publish regulations on when business meals expenses are deductible.

2. Qualifying property in service on or after September 27, 2017, must file election to choose 100% depreciation deduction with the IRS by October 15, 2018. The election allows to write-off depreciable assets in the year placed in service and generally applies to depreciable assets used in the business with life of 20 years or less. For timely filed 2017 return and did not elect out but wanted to elect out will need to file an amended return.

3. Unless you are member of Armed Forces on duty, moving expenses is no longer deductible.

4. Child tax credit and additional child tax credit increased to $2,000 per qualifying child and maximum additional child tax credit increased to $1,400 subject to income threshold phase out of $200,000 and $400,000 for married filing jointly.

5. There is new credit of $500 available to each dependent who does not qualify for child tax credit subject to income threshold phase out of $200,000 and $400,000 for married filing jointly.

6. Social security number is now required to claim for child tax credit. The qualifying child must have a social security before the deadline on your 2018 tax return to qualify for child tax credit or additional child tax credit. If the child has an Individual Tax Identification Number and not SSN by the due date of the tax return, new credits for other dependents may apply.

7. Standard deduction increased to: $12,000 for single or married filing separate, $24,000 for married filing joint, and $18,000 for head of household.

8. Personal exemption has been suspended and therefore no personal exemption deduction will be on the return.

9. Itemized Deductions:

1) Limited to combined deduction of $10,000 state and local income tax, sales, and property taxes.

2) Job-related expenses or other miscellaneous deductions no longer deductible.

3) You may still deduct gambling losses.

4) Home acquisition indebtedness incurred after December 15, 2017 is limited up to $750,000 of mortgage interest deduction.

5) Home equity indebtedness is no longer deductible if not for purpose of buying or improving qualified residence secured by the debt.

6) Cash charitable contributions increased to 60% of adjusted gross income from 50%.

7) You can deduct medical expenses in excess of 7.5% of your adjusted gross income.

8) The itemized deductions are no longer limited if over a certain amount of adjusted gross income.

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Disclaimer: Any accounting, business or tax advice contained in this communication is neither intended as a thorough, in-depth analysis of specific issues, nor a substitute for a formal opinion, nor is it sufficient to avoid tax-related penalties.

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Al-os & Associates  Accountancy Corporation provides accounting and tax services to individuals, corporations, LLCs and business entities. The Firm has a niche in defending taxpayers audited by the IRS and other governmental agencies.    

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