Frequently asked individual tax questions from the new tax bill
Frequently asked individual tax questions from the new tax bill
As we now enter the second half of the year, we thought it would be helpful for your tax-planning efforts to compile a list of the most frequently asked questions we have received that will affect your personal tax situation in 2018.
What happened to the Estate Tax? It is still around, but with a significantly higher amount of assets shielded from the tax. Double, to be exact, to $11 million per person. The amount of annual gifts coming from one person without eating into the $11 million exemption is now $15,000 per recipient.
Did the capital gains and dividends rate increase? No, they did not change. Most still fall in the 15% tax rate with a top maximum 20% rate for those with taxable income over $479,000 (marrieds), $425,800 singles. There is no capital gains tax for marrieds with taxable income under $77,200.
What about the investment income tax? The 3.8% surtax on investment income is still around and is applied to investment income for those with AGI over $250,000(joint), $200,000 singles.
Is the personal exemption and standard deduction still around? The personal exemption is gone, but the standard deduction is still here and increases in 2018 from $12,700 to $24,000 for joint filers.
But, can I still itemize? Yes. When your itemized deductions exceed the newly expanded standard deduction amounts of $24,000 (joint), then you get the higher write-off.
What about miscellaneous itemized deductions? Tax reform completely eliminated the write-off of miscellaneous itemized deductions such as tax prep fees, job hunting costs, hobby expenses and unreimbursed employee job-related expenses, such as work-related travel, transportation, and meal expenses.
Can I deduct interest on a home equity loan? Much confusion on this one. Any home equity debt used to improve your residence is still deductible, but home equity debt that has been used for anything else is not, such as paying off credit card debt, etc.
Any change to the tax-free home-sale exclusion? No. Marrieds can still defer tax-free gains up to $500,000 on the sale of a personal home as long it has been your main residence for two of the last five years.
Is the IRA-to-charity break still alive? Yes. Persons 70½ and older can annually transfer up to $100,000 from an IRA directly to charity without paying tax on the retirement distribution. The charitable transfers count as all or part of your required minimum distribution.
Can I still write-off property tax payments? Yes, but limited. State and local tax payments, including the property tax on your personal residence, are limited to an overall combined total of $10,000.
Did the 401(k) limits decrease? No. There was some talk of lowering the amounts you can contribute to your retirement plan, but nothing of significance happened. Although going forward you can no longer undo the tax paid on a traditional-to-Roth IRA conversion.
Tax Credits: The child tax credit is doubled to $2,000 for dependent children under age 17, and it significantly increased the amount of high-earners who can take the credit by substantially raising the phase-out ranges.
Individual Alternative Minimum Tax: It has not gone away, but the amount of income shielded from AMT is larger than before.
