Recent Tax Law Changes

2018 Federal Tax Law Change (Review)

Standard Deductions & Exemptions

Single or MFS - $ 12,200

MFJ or QW - $24,400

HOH - $18,350

Addition for age 65 older or blind:

  • $1300 per person MFJ, QW, MFS
  • $1650 per person Single or HOH

Alimony

Generally for divorce or separation instruments executed after December 31, 2018, alimony payments are not deductible, nor includable in income.

(Note: Date of original divorce or separation agreement must be reported in Part I & Part II of Schedule 1)

 

State and Local Taxes (SALT)

Limited on itemized deductions of up to $10,000.

Home Mortgage Interest

Deductible interest is limited to underlying indebtedness up to $1,000,000.

Home equity loan used to build an addition is deductible or repairs to home is deductible.

Home equity for personal living expenses is not.

Personal Casualty Losses

Suspended except for losses incurred in a federally declared disaster.

2% Itemized Deductions

All deductions that fall under the 2% itemized deductions were eliminated.

 

Child Tax Credit

Child Tax Credit $2000, with $1400 being refundable. Increased phase-out is $400,000 for joint return ($200,000 for all other returns.

Non-Child Dependent Credit

$500 Same phase-outs as child credit.

 

Qualified Business Income Deduction

“Pass Thru”; New Section 199A. 20% of net income is tax free.

Deduction reduces taxable income, but not adjusted gross income nor self-employment tax.

A phase out threshold of $315,000 MFJ and $157,500 for other individuals, applies to specified service businesses in the fields of Health, Law, Consulting, Athletics, Financial and Brokerage services where principal asset is the reputation or skill of one or more employees or owners.

 

2018 NYS Tax Law Changes (Review)

Itemized Deductions

No $10,000 limitation on real property tax deduction.

Medical expenses threshold stays at 7.5% of FAGI.

No change to mortgage deductibility.

No change in the limitation on charitable contributions

Miscellaneous deductions (2% of AGI) maintained.

 

NYS – 529 Plan

  • Withdrawal used for higher education neither withdrawal or earnings are taxable.
  • Beginning 2018, also true if the withdrawal is to pay tuition for grades K thru 12.

 

 

 

Further Consolidated Appropriations Act 2020

Signed into law by President Trump on December 20th, 2019

 

Tax Extenders Passed and Retroactive to 2018 Tax Year

  • PMI (Mortgage Insurance) – deductible on Schedule A
  • Tuition and Fees Adjustment to Income
  • Qualified Mortgage Debt back up to $1,000,000
  • 10% penalty waived for disaster relief monies taken from Pension and/or IRA
  • Discharge of mortgage of personal principal residence is non-taxable. (Form 982)

 

New for 2019 and 2020

  • Medical expenses are now back down to 7.5 % of AGI from 10%
  • Kiddie Tax reverts back to parents’ tax rate from estate tax rate.

 

SECURE Act
Setting Every Community Up for Retirement Enhancement

  • RMD (Required Minimum Distribution) moved from 70 ½  to 72 years of age.
  • NO age restrictions on IRA contributions.
  • QCD’s (Qualified Charitable Distributions) still allowed at 70 ½
  • Change in distribution for beneficiaries on IRAs.
  • 10% penalty waived on the first $5000 distribution for birth or adoption from pension or IRA.
  • Up to $10,000 distribution from a 529 plan may be used to pay student loans.