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2018 Tax Changes



Lisa Nason, Tax Advisor, Greenvillle, NC, TaxConnections

Most of you are aware that a new tax law was recently passed.  Most of the changes relate to 2018 and beyond – here are just a few of the ones most like to affect individuals.

Standard Deduction Increased

For tax years beginning after Dec. 31, 2017 and before Jan. 1, 2026, the standard deduction is increased to $24,000 for married individuals filing a joint return, $18,000 for head-of-household filers, and $12,000 for all other taxpayers, adjusted for inflation in tax years beginning after 2018. No changes are made to the current-law additional standard deduction for the elderly and blind. 

Personal Exemptions Suspended

For tax years beginning after Dec. 31, 2017 and before Jan. 1, 2026, the deduction for personal exemptions is effectively suspended by reducing the exemption amount to zero.

Capital Gains Provisions Conformed

The Act generally retains present-law maximum rates on net capital gains and qualified dividends.

INCOME FROM PASS-THROUGH ENTITIES   

Generally for tax years beginning after Dec. 31, 2017 and before Jan. 1, 2026, the Act adds a new section,

Code Sec. 199A, “Qualified Business Income,” under which a non-corporate taxpayer, including a trust or estate, who has qualified business income (QBI) from a partnership, S corporation, or sole proprietorship is allowed to deduct:

  • (1) the lesser of: (a) the “combined qualified business income amount” of the taxpayer, or (b) 20% of the excess, if any, of the taxable income of the taxpayer for the tax year over the sum of net capital gain and the aggregate amount of the qualified cooperative dividends of the taxpayer for the tax year; plus
  • (2) the lesser of: (i) 20% of the aggregate amount of the qualified cooperative dividends of the taxpayer for the tax year, or (ii) taxable income (reduced by the net capital gain) of the taxpayer for the tax year.

The deduction does not apply to specified service businesses (i.e., trades or businesses described in Code Sec. 1202(e)(3)(A), but excluding engineering and architecture; and trades or businesses that involve the performance of services that consist of investment-type activities). However the service business limitation does not apply in the case of a taxpayer whose taxable income does not exceed $315,000 for married individuals filing jointly ($157,500 for other individuals), both indexed for inflation after 2018.

Have a question? Contact Lisa Nason. Your comments are always welcome!

Tax Partner with more than 20 years of experience preparing tax returns businesses and individuals, including income tax, property tax, state and local tax, sales & use tax, etc. We also work on estate and trust returns as well as assisting with tax planning, tax audits, and bookkeeping. We also help clients with general business advice and consulting as needed.

Nason Accounting, LLC is a Greenville, SC based full service certified public accounting firm that helps businesses and individuals increase and preserve their financial net worth. We provide accurate and timely accounting information that is vital for any individual or business.

We service clients both locally in the Upstate and throughout the Southeast. Our team understands the importance of great customer service, eliminating cumbersome bookkeeping stress, and making your success a priority. With experience in every imaginable accounting service, Nason Accounting, LLC is prepared to help you and your business with all of your financial needs.

4 thoughts on “2018 Tax Changes

  1. DON SHUSTERMAN says:

    is the additional standard deduction for the elderly and blind the same amount or is it effectively doubling also?
    Thanks.

    • Lisa Nason says:

      Don, My understanding is that the enhanced standard deduction for the elderly and blind is still available and that those amounts have not changed.

  2. Karey says:

    Lisa,

    I’ve heard the new tax law amended the requirement to claim discharged student loan debt on their taxes for permanently and totally disabled people. Has this change removed this requirement?

    Thanks,

    Karey

  3. Karey says:

    Sorry I couldn’t find this before I posted the last comment, but here is the amendment I was referencing:

    PART IV—EDUCATION
    SEC. 11031. TREATMENT OF STUDENT LOANS DISCHARGED ON ACCOUNT OF DEATH OR DISABILITY.

    (a) In General.—Section 108(f) is amended by adding at the end the following new paragraph:

    “(5) DISCHARGES ON ACCOUNT OF DEATH OR DISABILITY.—
    “(A) IN GENERAL.—In the case of an individual, gross income does not include any amount which (but for this subsection) would be includible in gross income for such taxable year by reasons of the discharge (in whole or in part) of any loan described in subparagraph (B) after December 31, 2017, and before January 1, 2026, if such discharge was—
    “(i) pursuant to subsection (a) or (d) of section 437 of the Higher Education Act of 1965 or the parallel benefit under part D of title IV of such Act (relating to the repayment of loan liability),
    “(ii) pursuant to section 464(c)(1)(F) of such Act, or
    “(iii) otherwise discharged on account of the death or total and permanent disability of the student.
    “(B) LOANS DESCRIBED.—A loan is described in this subparagraph if such loan is—
    “(i) a student loan (as defined in paragraph (2)), or
    “(ii) a private education loan (as defined in section 140(7) of the Consumer Credit Protection Act (15 U.S.C. 1650(7))).”.
    (b) Effective Date.—The amendment made by this section shall apply to discharges of indebtedness after December 31, 2017.

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