It’s a season to do some Tax Planning

Monica Singhania

The Tax Cuts and Jobs Act, commonly known as #TCJA enacted in 2017, will come into force when we file our taxes for the year ending 2018.  Few key highlights for individuals are as follows: 

  1. Lower tax rates, with 10%, 12%, 22%, 24%, 32%, 35% and 37% with more broader tax brackets
  2. Personal Exemption is gone
  3. Itemized tax deductions will be used by fewer people because of higher standard deduction limits. Remember that you can claim higher of itemized or standard deductions to find the taxable income. Check this free tool to find out. The standard deduction amounts have increased to $12,000 for single and $24,000 for married filing jointly
  4. The State and Local taxes (SALT) have been capped at $10,000
  5. You will be able to deduct mortgage interest for home acquisitions for $750,000 of new mortgage debt, previously this was applicable to one million mortgage debt
  6. Any interest related to the Home Equity Line will only be deductible to the extent that it is used for buy, build or substantially improve the property, interest paid for  any other purpose like paying down other debt will not be deductible 
  7. If you pay alimony, you will not be able to deduct this, however, if you receive Alimony good news is it will be tax-free
  8. Medical expenses have a higher threshold of 10% of Adjusted Gross Income (AGI) to pass in order to be claimed as a deduction
  9. Miscellaneous Itemized Deductions like tax preparation fees, investment expenses etc. are gone under the new act 
  10. Traditional IRA conversions to ROTH IRA have become non-reversible under the new tax law
  11. Charitable deduction will be used by fewer people because of the use of standard deduction instead of Itemizing the deductions
  12. If you are planning to give to charity, you can bunch your charitable giving in such a  way that you re able to itemize deductions in one year and take the standard deduction in another year thus maximizing the deductions for you.
  13. Casualty loss deduction rules have changed

 

Monica Singhania

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