Many changes occurred in the tax code as a result of the Tax Cuts and Jobs Act (TCJA) in 2017. In general, tax rates for individuals and businesses were reduced and business deductions favoring economic investments by businesses have been enhanced. Below we have listed some of the highlights of the TCJA. Applying the law in many instances is very complex. Please ask us how the law applies to your unique circumstances.

Income Tax Rates – Lowered
• Individual tax rates reduced (Max rate 39.6% to 37%)
• Fixed corporate rate of 21% (Down from 35%)
• Estate and trust tax rates reduced (Max rate 39.6% to 37%)

Alternative Minimum Tax Impact – Significantly Reduced
• AMT exemption increased to $109,400 for MFJ and $70,300 for Single
• AMT exemption phaseout threshold increased to $1,000,000 (MFJ) from $150,000
• AMT exemption phaseout threshold increased to $500,000 (Unmarried) from $112,500

Affordable Care Act
• Shared responsibility payment eliminated after 2018

Individual Deductions and Credits
• Standard Deduction almost doubled
• Personal exemption reduced to zero
• Miscellaneous itemized deductions disallowed
• Itemized deduction limitation suspended
• State and Local tax and real estate tax deductions capped at $10,000
• Interest deduction on mortgage debt lowered to $750,000 of new acquisition indebtedness
• Alimony “awarded” after 2018 not deductible by payer; not taxable by receiver
• Child tax credit increased from $1,000 to $2,000 ($1,400 refundable).

Business Deductions
• 20% deduction for Qualified Business Income for pass-through entities
• Eligible Small Business Trusts may now include non-residents of the US
• Net Operating Losses must now be carried forward only
• Entertainment expenses are no longer deductible (sports tickets, shows, etc.)
• Section 179 depreciation raised to $1 million; Phaseout increased to $2.5 million
• More building improvements and qualifying residential rental property eligible for Section 179
• Bonus depreciation increased from 50% to 100% through 2023
• Used equipment purchases now qualify for bonus depreciation
• Cash basis and completed contract method of accounting available for businesses with average sales up to $25 million (raised from $10 million)
• UNICAP repealed for businesses with average sales up to $25 million

Applying the law in many instances is very complex.  Please ask how the law applies to your unique circumstances by calling us at 401-831-0200, or emailing contactus@pgco.com.