The elimination of Miscellaneous Itemized Deductions that are subject to the 2% floor under the Tax Reform Act applies to Estates and Trusts.  This includes Tax Preparation fees (unless they can be allocated to Schedules C, E, or F), Fiduciary fees, Investment advisory fees, or Asset management fees. 
 
There is an exception to the 2% floor for Administrative costs that are paid or incurred by an Estate or Trust and that wouldn’t ordinarily have been incurred if the property weren’t held in an Estate or Trust.  This is an important distinction because Estates and Trusts can incur large Tax Preparation and Fiduciary fee expenses for the management of Estate or Trust assets.  To this point, the IRS has released proposed regulations that confirm the tax reform act elimination of Miscellaneous Itemized Deductions does not eliminate expenses that were previously deductible under IRC §67E. 
 
Therefore, for tax years beginning after 12/31/2017, administrative expenses are still fully deductible on Fiduciary returns.  The regulations also state that the appropriate portion of bundled fees is still deductible.  So, if a portion of the fee is attributable to Administrative expenses, then it is still deductible.
 
Prior to the tax reform act, in the Final year of an Estate or Trust, beneficiaries were also generally allowed to take deductions in excess of 2% of gross income on their 1040.  For tax years beginning after 12/31/2017, these deductions are no longer allowed.  Trustees and Executors should consider when to pay expenses in order to avoid lost deductions.  For example, it might be beneficial to prepay the cost of preparing the final Estate or Trust tax return in a year prior to the final distribution if the deduction for that expense would otherwise be lost. 
 
The proposed regulations don’t clarify this issue, but they do state that final regulations will address the ability of beneficiaries to deduct expenses that would have been deductible on the Estate’s or Trust’s tax return after the termination of the Estate or Trust.  But, as of now, there is no timeframe for when these final regulations will be available.

How to get the greatest tax deduction
The first question to ask is, "With the increase in the standard deduction, will I still benefit by itemizing my deductions?" If not, you may, in effect, lose your charitable contribution deduction.

There are several ways to continue donating to your favorite charitable organizations and still get a tax deduction. 

Charitable contributions are one of the few deductions enhanced under the Act, which increased the AGI limitation on cash contributions from 50% to 60%. That means that you can contribute and take a deduction for up to 60% of your adjusted gross income.

High Income Individuals
Under the old law, charitable deductions were subject to limitations.  For those with high income, these limitations reduced their deductions by 3% for every dollar of taxable income over certain thresholds and ultimately up to 80% of their itemized deductions.  The new tax law repeals the limitations!  Those high-income households can now donate and get the full deduction, no matter how much you earn.

Retired Individuals
If you are over 70-1/2 years old, you should make your charitable contributions directly from your IRA account. You can contribute up for $100,000 per year using a Qualified Charitable Donation (or QCD).  

If you are younger, there are other ways to make your charitable contributions deductible such as through a Donor-Advised Fund.  Other strategies involve bunching your giving into years.

Have concerns or need advice to maximize your charitable deductions?  Contact our Tax Team for a review of your Itemized Deductions and Charitable Giving strategy.

If you currently own a home or are looking to purchase a home, you need to be aware of the tax changes that will impact your home tax deductions. You can review your 2017 Schedule A for the amounts you paid and how this may change for 2018.

State & Local Taxes
This category of itemized deductions includes amounts paid for state and local income tax, sales tax, and property tax. This includes such items as sales tax paid for a new car or boat, RTA tax paid with your car tab renewal, and real estate tax paid on your primary and second homes.

Under the new law, only $10,000 of combined income, sales, and property taxes are deductible. Watch out - if you live in high-tax cities and states, your deduction may be limited!

Home Mortgage Interest Deduction
The amount of mortgage interest you can deduct is based on the total amount of your mortgage debt (primary residence and second home combined including all mortgages). For 2017, this amount was $1 million. For 2018, this amount decreases to $750,000. Don't panic yet you may still be eligible under the $1-million rule if:

• You purchased your home  prior to the end of 2017.
• You purchased a home in 2018, but had a written contract in place by Dec. 15, 2017, and the purchase was finalized by April 1, 2018.
• You refinanced your current home and the new loan does not exceed the principal balance of the old loan at the time of refinancing.

Mortgage interest on home equity debt, often referred as HELOC interest, is now only deductible to the extent that the home equity debt was used to buy, build, or substantially improve the taxpayer's home that secures the loan. Interest on loans used for any other purpose, such as to pay off personal debt, is no longer deductible. This applies to all home equity debt established before and after 2018. However, existing HELOC loans used for qualified expenditures prior to 2018 can still be considered up to the $1-million threshold.

September typically marks the beginning of "tax planning season" for many clients, especially business owners, who are trying to get a handle on their upcoming tax obligations.  Below is some information about what you can expect in terms of tax planning and analysis.

First of all, tax planning or analysis is not tax preparation.

• Tax preparation gets the filing done.  The main goal is to make sure your tax reporting complies with both Federal and State tax laws.  It deals with historical information.
• Tax planning provides proactive tax advice.  It helps arrive at ways to minimize the amount of tax you must pay.
• A tax analysis takes planning to the next step.  Clients engage us for analysis to give them peace of mind.  An analysis, with proper assumptions and due diligence, should eliminate a nasty April 15th surprise.  It involves calculations of future taxes and is usually performed to provide a client with a schedule of tax payments to eliminate a tax-due situation and/or to avoid penalties and interest.  
• Scenario analysis takes tax analysis even further.  It is an iterative and laborious process of calculating and predicting the value of a set of situations, under a variety of different circumstances or scenarios. 

There is no such thing as a “typical” tax plan or analysis.  The list below provides examples why some clients contact us for tax planning:

• Sale of Rental Property or Residence
• Starting New Business
• Entity Change consideration (i.e., Sole Proprietorship vs. S Corporation)
• Ownership in Foreign Business
• Converting Traditional IRA to Roth
• Changing Jobs
• Change in Marital Status
• Estate Planning

How Much Does it Cost for you to Prepare a Tax Plan or Analysis?

The cost depends upon the level of effort and output you want.  The list is in order from least expensive to most expensive:

1. General information that can be delivered to you in a quick 5-minute phone call
2. General information, but you want it outlined in writing via email
3. Using supplied information from you, detailed calculations that answer your question(s) and provided to you in a quick 5-minute phone call
4. Using supplied information from you, detailed calculations that answer your question(s) and provided to you in report format and emailed to you and/or a consultation
5. Scenario analysis with a written report of findings and or a consultation

Because each situation is unique, currently we bill for tax planning and analysis on an hourly basis.  Our standard rate is $255 per hour.

For more information, contact us so we can get address your planning needs and peace of mind.

Another new tax law change:

The standard deduction for tax year 2018 almost doubled from 2017. With this increase, along with the changes to itemized deductions, the IRS predicts that more people will take the standard deduction.

On your personal tax return each year you have the choice of taking the standard deduction or itemizing your deductions. In almost all cases, you take the largest amount.

Standard deduction amounts for 2018

Single $12,000
Married Filing Jointly $24,000
Married Filing Separate $12,000
Head of Household $18,000

If you are 65 or over, blind, or disabled, you can add an additional $1,300 if married or $1,600 if unmarried.

Depending on your situation, you may save money on taxes or have a higher tax bill for 2018.  

The Tax Cuts and Jobs Act made sweeping changes that impact deductions and credits related to family and dependents.

Personal and Dependent Exemptions
In 2017,  you were allowed an exemption for yourself, your spouse and any eligible family members such as children. The amount was $4,050 per person in 2017. For a family of four, that was a $16,200 reduction in taxable income. Exemptions have been eliminated for tax year 2018. However some of the changes below may more than make up the difference.

Child Tax Credit 
If you have a qualifying child under the age of 17, you may be able to take a Child Tax Credit. While this credit is not new, there are major changes:

• The maximum credit increased from $1,000 to $2,000 per qualifying child. 
• The credit begins phasing out at $400,000 for couples and $200,000 for singles. 

Additional Child Tax Credit 
The maximum additional child tax credit increased to $1,400. This credit has income limits and is applied after the child tax credit.

Other Dependents 
If you have children or other dependents who do not qualify for the child tax credit, there is a new $500 family credit. These dependents include qualifying children or qualifying relatives, such as dependent children who are age 17 or older, or parents or other qualifying relatives that you support. To qualify the dependent must have no other income.

What does this mean?
For families with children over age 17, you might get a tax bite.  Additional taxes will  be paid by those families supporting siblings and/or parents.  But overall, young families will enjoy a reduction in tax.

It's been estimated that the number of people who itemize will fall by more than half in 2018 because of changes made by the Tax Cuts and Jobs Act (TCJA; P.L. 115-97, 12/22/2017). That's bad news for many charitable givers, but those who are age 70½ or older can continue to gain a tax benefit from their charitable contributions even if they don't itemize. The key is to make the gift by way of a qualified charitable distribution (QCD).
 
Charitable contributions may still be claimed as an itemized deduction, but the TCJA restricted itemized deductions for state and local income and property tax, tinkered with the deduction for residence interest (by reducing the dollar limit on acquisition debt and eliminating the deduction for interest on home equity debt), and did away with miscellaneous itemized deductions. It also nearly doubled the standard deduction. The net result is that charitable contributions won't yield any tax benefit for the many millions more Americans who will no longer itemize their deductions.
 
But the TCJA didn't touch one way for older individuals—specifically, those who are age 70½ or older and are receiving required minimum distributions (RMDs) from IRAs—to come out ahead tax-wise when they make a charitable contribution. The key is to make annual contributions by way of qualified charitable distributions from their IRAs, and to reduce RMDs by a commensurate amount.
 
Required minimum distributions. Taxpayers must start taking annual RMDs from their traditional IRAs by April 1 following the year in which they attain age 70½. (Code Sec. 401(a)(9) Failure to withdraw the annual RMD could expose the taxpayer to a penalty tax equal to 50% of the excess of the amount that should have been withdrawn over the amount actually withdrawn. (Code Sec. 4974) The first distribution year is the year in which the IRA owner attains age 70½, but that first distribution may be postponed until the second distribution year.
 
The amount of each RMD is calculated separately for each IRA. However, the RMD amounts for the separate IRAs may be totaled and the aggregated RMD amount may be paid out from any one or more of the IRA accounts. (Reg. § 1.408-8, Q&A 9) Each year's RMD is determined by a table percentage that varies with the taxpayer's age and is applied against his or her total IRA balance at the end of the preceding year.
 
Qualified charitable distributions. An annual exclusion from gross income (not to exceed $100,000) is available for otherwise taxable IRA distributions that are QCDs. (Code Sec. 408(d)(8)) Such distributions aren't included in gross income, can't be claimed as a deduction on the taxpayer's return, and aren't subject to the general percentage limitations that apply for making charitable contributions. Under Notice 2007-7, 2007-1 CB 395, even though a QCD from an IRA to a charity is not included in the taxpayer's gross income, it is taken into account in determining the owner's RMD for the year.
 
A qualified charitable distribution is one that is made

1. On or after the IRA owner attained age 70½ and
2. Directly by the IRA trustee to a Code Sec. 170(b)(1)(A) charitable organization (other than a Code Sec. 509(a)(3) organization or a donor advised fund (as defined in Code Sec. 4966(d)(2)).

 
Also, to be excludable from gross income, the distribution must be otherwise entirely deductible as a charitable contribution deduction under Code Sec. 170 without regard to the regular charitable deduction percentage limits.
 
Recommendation. Using qualified charitable distributions—instead of making charitable gifts from other sources—can result in meaningful tax savings for charitable-minded older taxpayers who are receiving RMDs and will not itemize their deductions. For 2018, that will be the case if total itemized deductions, including charitable contribution deductions, won't exceed $24,000 for joint filers, $18,000 for heads of household, and $12,000 for single filers (plus $1,300 for the elderly or blind, or $1,600 for a taxpayer who is unmarried and not a surviving spouse).
 
Illustration. Fred and Anne Able are both age 72 and will have $110,000 of adjusted gross income (AGI) for 2018, including $40,000 of RMDs that Fred is required to take from his IRAs. They will not be able to itemize deductions. Each year, they give a $2,000 check to their place of worship and another $1,000 to a children's hospital. If they make the same gifts this year by writing checks to these charities, their taxable income will be $83,400 ($110,000 minus $26,600 standard deduction) and their federal income tax bill will be $10,227. Alternatively, they can withdraw only $37,000 from Fred's IRAs, and make their $3,000 of charitable gifts via QCDs from those IRAs. This way, they will satisfy their charitable giving goals, meet Fred's RMD requirement, and reduce their taxable income to $80,400 ($107,000 minus $26,600 standard deduction). Their tax bill will be $9,567, or $660 less than doing things the usual way.
 
The higher the taxpayer's marginal tax bracket, the more tax dollars would be saved. For example, if joint filers have $320,000 of non-RMD gross income and $40,000 of RMDs, making a $3,000 QCD and reducing IRA withdrawals by a like amount would save $960 (32% of $3,000) in tax dollars.
 
Recommendation. Taxpayers interested in using QCDs to reduce their tax bills should defer taking RMDs—or defer taking the entire amount of the RMD—until near the end of the year or whenever else in the year that they know how much they will contribute to charity for the year. By doing so, they can know before taking any actual IRA distributions how much their RMD (and AGI, and taxable income) can be reduced by making QCDs for the year.
 
Caution. A QCD must be made directly by the IRA trustee to a charitable organization. Thus, a distribution made to an individual, and then rolled over to a charitable organization, is not excludable from gross income.
 
However, if a check from an IRA is made payable to a charitable organization, and delivered by the IRA owner to that organization, then the payment to the organization is treated as a direct payment made by the IRA trustee to the organization. (Notice 2007-7, Sec. IX, Q&A 41, 2007-5 IRB 395)
 
Can the strategy work for itemizers as well? The answer is "yes" if the age-70½-or-older taxpayer would be able to itemize even without claiming gifts to charity, and has high medical expenses. An amount (up to $100,000) paid out to a charity as a QCD instead of being received as a regular RMD reduces AGI and may qualify the taxpayer for a higher medical expense deduction. Under the TCJA, medical expenses can be claimed as an itemized deduction for 2018 only to the extent they exceed 7.5% of AGI (above 10% of AGI for 2019 and later). Additionally, the reduced AGI may help avoid or mitigate the effect of the 3.8% surtax on net investment income. This surtax is levied on the lesser of
 

1. Net investment income or
2. The excess of modified AGI over the threshold amount ($250,000 for joint filers or surviving spouses, $125,000 for marrieds filing separately, and $200,000 for other taxpayers). 

Many times, clients are surprised to find they must file a gift tax return, even when they don't owe gift or estate taxes.

The IRS can impose penalties for not filing a gift tax return, even when no tax was due.

You don’t owe gift taxes and aren’t likely to because of the lifetime estate and gift tax exclusion, so you don’t have file a gift tax return.  Right?  Wrong, in a number of instances.

You may need to file a gift tax return, even if you won’t owe gift or estate taxes.

For 2018, each individual can exempt up to $11,180,000 of property from Federal estate* and gift taxes. Married couples potentially can exclude twice that amount. There’s also the annual gift tax exclusion amount, which is $15,000 for 2018. You can make gifts up to $15,000 per beneficiary during the year, and those gifts won’t be included in your “taxable gifts” during the year. That means they won’t count against your lifetime exclusion amount. You can make these gifts to any number of people during the year, and there’s no lifetime limit.

When your annual gifts or even your entire estate are well below those levels, you still aren’t free from worry about filing gift tax returns. The IRS can impose penalties for not filing a gift tax return, even when no tax was due.

Gifts above the annual gift tax exclusion amount made during the year generally must be reported on Form 709. The gifts might not be taxed, because of the lifetime gift tax exclusion. But the gifts reduce the lifetime exclusion and must be reported so the IRS can track your use of the lifetime exclusion amount.

*Note:  The Washington estate exemption is quite lower ($2,193,000 for 2018).  For more information, contact us.

The new tax year is a true game-changer for taxpayers and their advisers, as many fundamental, decades-old tax rules have been repealed or suspended, with many new ones going into effect. This article, the second of a series, highlights the tax changes that apply in 2018 to individuals relating to deferred compensation, tax-preferred accounts, retirement plans, estate and gift taxes, capital assets and investments, and disaster losses.

New deferral election for stock grants of startups. Generally effective for stock attributable to options exercised or restricted stock units (RSUs) settled after Dec. 31, 2017, a qualified employee can elect to defer, for income tax purposes, recognition of the amount of income attributable to qualified stock transferred to the employee by a qualified employer. (Code Sec. 83(i)) The election applies only for income tax purposes; the application of FICA and FUTA is not affected. If the election is made, the income has to be included in the employee's income for the tax year that includes the earliest of five events, one of which is the first date on which any stock of the employer becomes readily tradable on an established securities market. (Code Sec. 83(i)(1)(B))

The new election applies for qualified stock of an eligible corporation. A corporation is treated as eligible for a tax year if:

1. No stock of the employer corporation (or any predecessor) is readily tradable on an established securities market during any preceding calendar year, and
2. The corporation has a written plan under which, in the calendar year, not less than 80% of all employees who provide services to the corporation in the US (or any US possession) are granted stock options, or restricted stock units (RSUs), with the same rights and privileges to receive qualified stock. (Code Sec. 83(i)(2)(C))

Detailed employer notice, withholding, and reporting requirements apply with regard to the election. (Code Sec. 83(i)(6))

ABLE account liberalizations. Effective for tax years beginning after Dec. 22, 2017, and before Jan. 1, 2026, after the overall limitation on contributions to ABLE accounts is reached (i.e., the annual gift tax exemption amount; for 2018, $15,000), an ABLE account's designated beneficiary can contribute an additional amount, up to the lesser of

1. The Federal poverty line for a one-person household; or
2. The individual's compensation for the tax year. (Code Sec. 529A(b))

Additionally, the designated beneficiary of an ABLE account can claim the saver's credit under Code Sec. 25B for contributions made to his or her ABLE account. (Code Sec. 25B(d)(1))

For distributions after Dec. 22, 2017, amounts from qualified tuition programs (QTPs, also known as 529 accounts) may be rolled over to an ABLE account without penalty, provided that the ABLE account is owned by the designated beneficiary of that 529 account, or a member of such designated beneficiary's family. (Code Sec. 529(c)(3)) Such rolled-over amounts are counted towards the overall limitation on amounts that can be contributed to an ABLE account within a tax year, and any amount rolled over in excess of this limitation is includible in the gross income of the distributee.

Expanded use of Sec. 529 accounts. For distributions after Dec. 31, 2017, "qualified higher education expenses" for purposes of the Code Sec. 529 rules, include tuition at an elementary or secondary public, private, or religious school, up to a $10,000 limit per tax year. (Code Sec. 529(c)(7))

Crackdown on recharacterizations. For tax years beginning after Dec. 31, 2017, the rule that allows a contribution to one type of IRA to be recharacterized as a contribution to the other type of IRA does not apply to a conversion contribution to a Roth IRA. Thus, recharacterization cannot be used to unwind a Roth conversion. (Code Sec. 408A(d))

Observation: Although the effective date for the provision eliminating the election to unwind such a conversion is stated as being for tax years beginning after Dec. 31, 2017, there has been some speculation among tax professionals that the ability to make such an election to unwind may be able to be made up to the date that a return is due. Simply put, the interpretation at issue is: does the effective date (i.e., before 2018) refer to the tax year when the recharacterization is made, or the tax year when the unwinding occurs?

Liberalized rules for awards to volunteers. For tax years beginning after Dec. 31, 2017, the aggregate amount of length of service awards that may accrue for a bona fide volunteer with respect to any year of service, is increased from $3,000 to $6,000. (Code Sec. 457(e))

Extended rollover period for plan loan offset amounts. For plan loan offset amounts which are treated as distributed in tax years beginning after Dec. 31, 2017, the period during which a qualified plan loan offset amount may be contributed to an eligible retirement plan as a rollover contribution is extended from 60 days after the date of the offset to the due date (including extensions) for filing the Federal income tax return for the tax year in which the plan loan offset occurs—that is, the tax year in which the amount is treated as distributed from the plan. A qualified plan loan offset amount is a plan loan offset amount that is treated as distributed from a qualified retirement plan, a Code Sec. 403(b) plan, or a governmental Code Sec. 457(b) plan solely by reason of the termination of the plan or the failure to meet the repayment terms of the loan because of the employee's separation from service, whether due to layoff, cessation of business, termination of employment, or otherwise. A loan offset amount is the amount by which an employee's account balance under the plan is reduced to repay a loan from the plan. (Code Sec. 402(c))

Estate & gift tax exemption increased. For estates of decedents dying and gifts made after Dec. 31, 2017 and before Jan. 1, 2026, the base estate and gift tax exemption amount is doubled from $5 million to $10 million. (Code Sec. 2010(c)(3)) The $10 million amount is indexed for inflation occurring after 2011 and is expected to be approximately $11.2 million in 2018 ($22.4 million per married couple).

New holding period requirement for carried interest. Effective for tax years beginning after Dec. 31, 2017, there's a 3-year holding period requirement in order for certain partnership interests received in connection with the performance of services to be taxed as long-term capital gain. (Code Sec. 1061) If the 3-year holding period is not met with respect to an applicable partnership interest held by the taxpayer, the taxpayer's gain will be treated as short-term gain taxed at ordinary income rates. (Code Sec. 1061(a))

Capital asset treatment barred for certain self-created property. Effective for dispositions after Dec. 31, 2017, the definition of a "capital asset" does not include patents, inventions, models or designs (whether or not patented), and secret formulas or processes, which are held either by the taxpayer who created the property or by a taxpayer with a substituted or transferred basis from the taxpayer who created the property (or for whom the property was created). (Code Sec. 1221(a)(3))

Like-kind exchange crackdown. Generally effective for transfers after Dec. 31, 2017, gain on like-kind exchanges is deferred only with respect to real property that is not held primarily for sale. However, under a transition rule, the prior-law like-kind exchange rules continue to apply to exchanges of personal property if the taxpayer has either disposed of the relinquished property or acquired the replacement property on or before Dec. 31, 2017. (Code Sec. 1031)

Repeal of rollover of publicly traded securities gain into specialized SBICs. For sales after Dec. 31, 2017, the tax-favored rollover under former Code Sec. 1033 of publicly traded securities gain into specialized SBICs is repealed.

Broadened incentives for Qualified Opportunity Zone investment. Effective on Dec. 22, 2017, a new rule provides temporary deferral of inclusion in gross income for capital gains reinvested in a qualified opportunity fund and the permanent exclusion of capital gains from the sale or exchange of an investment in the qualified opportunity fund. (Code Sec. 1400Z-2, as added by Act Sec. 13823)

Deductions for net disaster losses. For any tax year beginning after Dec. 31, 2017, and before Jan. 1, 2026, an individual's standard deduction is increased by the net disaster loss. (Tax Cuts and Jobs Act Sec. 11028(c)(1)(C)) Additionally, if any individual has a net disaster loss for any tax year beginning after Dec. 31, 2017 and before Jan. 1, 2026, the AMT adjustment for the standard deduction doesn't apply to the increase in the standard deduction that is attributable to the net disaster loss. (Tax Cuts and Jobs Act Sec. 11028(c)(1)(D))
​
A net disaster loss is the excess of

1. Qualified disaster-related personal casualty losses, over
2. Personal casualty gains.

"Qualified disaster-related personal casualty losses" are those described in Code Sec. 165(c)(3) that arise in a 2016 disaster area, namely any area with respect to which a major disaster was declared by the President under section 401 of the Robert T. Stafford Disaster Relief and Emergency Assistance Act during calendar year 2016. (Tax Cuts and Jobs Act Sec. 11028(a))

The new tax year is a true game-changer for taxpayers and their advisers, as many fundamental, decades-old tax rules have been repealed or suspended, with many new ones going into effect. This article, the first of a series, highlights the tax changes that apply in 2018 to individuals – tax rates, deductions, and credits.

Revised income tax rates and tax brackets. For tax years beginning after Dec. 31, 2017 and before Jan. 1, 2026, seven tax rates apply for individuals: 10%, 12%, 22%, 24%, 32%, 35%, and 37%. There are four tax rates for estates and trusts: 10%, 24%, 35%, and 37%. (Code Sec. 1(i))

Boosted standard deduction. 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 previously-existing additional standard deduction for the elderly and blind. (Code Sec. 63(c)(7))

Personal exemptions suspended. For tax years beginning after Dec. 31, 2017 and before Jan. 1, 2026, the deduction for personal exemptions is suspended—the exemption amount is reduced to zero. (Code Sec. 151(d))

Kiddie tax modified. For tax years beginning after Dec. 31, 2017, the taxable income of a child attributable to earned income is taxed under the rates for single individuals, and taxable income of a child attributable to net unearned income is taxed according to the brackets applicable to trusts and estates. This rule applies to the child's ordinary income and his or her income taxed at preferential rates. (Code Sec. 1(j)(4))

Floor beneath medical expense deduction lowered. For tax years beginning after Dec. 31, 2016 and ending before Jan. 1, 2019, for all taxpayers, medical expenses may be claimed as an itemized deduction to the extent they cumulatively exceed 7.5% of adjusted gross income. (Code Sec. 213(f)) In addition, the rule limiting the medical expense deduction for AMT purposes to the excess of 10% of AGI doesn't apply to tax years beginning after Dec. 31, 2016 and ending before Jan. 1, 2019. (Code Sec. 56(b)(1)(B))

State and local tax deduction limited. For tax years beginning after Dec. 31, 2017 and before Jan. 1, 2026, itemized deductions for an individual's state or local taxes (as opposed to such taxes paid in connection with a Code Sec. 162 trade or business or in a Code Sec. 212 activity) are limited. The aggregate deduction for an individual's state and local real property taxes; state and local personal property taxes; state and local, and foreign, income, war profits, and excess profits taxes; and general sales taxes is limited to $10,000 ($5,000 for marrieds filing separately). The deduction for foreign real property taxes is completely eliminated unless paid or accrued in carrying on a trade or business or in an activity engaged in for profit. (Code Sec. 164(b)(6))

Crackdown on home mortgage and home equity interest. For tax years beginning after Dec. 31, 2017 and before Jan. 1, 2026, the deduction for interest on home equity debt is suspended, and the deduction for home acquisition mortgage interest is limited to underlying debt of up to $750,000 ($375,000 for married taxpayers filing separately). (Code Sec. 163(h)(3)(F)) The new lower limit doesn't apply to any acquisition debt incurred before Dec. 15, 2017. And, a taxpayer who entered into a binding written contract before Dec. 15, 2017 to close on the purchase of a principal residence before Jan. 1, 2018, and who buys the residence before Apr. 1, 2018, is treated as incurring acquisition debt before Dec. 15, 2017.
Prior law's $1 million/$500,000 limitations continue to apply to taxpayers who refinance existing qualified residence debt that was incurred before Dec. 15, 2017, so long as the debt resulting from the refinancing doesn't exceed the amount of the refinanced debt. (Code Sec. 163(h)(3)(F))

Boosted charitable contribution deduction limit. For contributions made in tax years beginning after Dec. 31, 2017 and before Jan. 1, 2026, the 50% limitation under Code Sec. 170(b) for cash contributions to public charities and certain private foundations is increased to 60%. (Code Sec. 170(b)(1)(G)) Contributions exceeding the 60% limitation generally may be carried forward and deducted for up to five years, subject to the later year's ceiling.

No charitable deduction for college athletic seating rights. For contributions made in tax years beginning after Dec. 31, 2017, no charitable deduction is allowed for any payment to an institution of higher education in exchange for which the payor receives the right to buy tickets or seating at an athletic event. (Code Sec. 170(l))

Miscellaneous itemized deduction suspended. For tax years beginning after Dec. 31, 2017 and before Jan. 1, 2026, there's no deduction for miscellaneous itemized deductions that are subject to the 2%-of-adjusted-gross-income (AGI) floor. (Code Sec. 67(g))

"Pease" limit on itemized deductions suspended. For tax years beginning after Dec. 31, 2017 and before Jan. 1, 2026, the "Pease limit" on itemized deductions is suspended. (Code Sec. 68(f)) Under this limit, the otherwise allowable amount of certain itemized deductions was reduced by 3% of the amount of a taxpayer's AGI exceeding a threshold amount; the total reduction couldn't be greater than 80% of all itemized deductions.

Other suspensions: The following exclusions and deductions don't apply for tax years beginning after Dec. 31, 2017 and before Jan. 1, 2026:

• The exclusion from gross income and wages for qualified bicycle commuting reimbursements. (Code Sec. 132(f)(8))
• The exclusion for qualified moving expense reimbursements, except for members of the Armed Forces on active duty (and their spouses and dependents) who move pursuant to a military order and incident to a permanent change of station. (Code Sec. 132(g))
• The deduction for moving expenses, except for members of the Armed Forces on active duty who move pursuant to a military order and incident to a permanent change of station. (Code Sec. 217(k))

Additionally, for tax years beginning after Dec. 22, 2017, members of Congress cannot deduct living expenses when they are away from home. (Code Sec. 162(a))

AMT exemption amounts increased. For tax years beginning after Dec. 31, 2017 and before Jan. 1, 2026, the alternative minimum tax (AMT) exemption amounts for individuals are increased to be the following amounts:

• For joint returns and surviving spouses, $109,400.
• For single taxpayers, $70,300.
• For marrieds filing separately, $54,700. (Code Sec. 55(d)(4))

The above exemption amounts are reduced (not below zero) to an amount equal to 25% of the amount by which the taxpayer's alternative minimum taxable income (AMTI) exceeds the following increased phase-out amounts:

• For joint returns and surviving spouses, $1 million.
• For all other taxpayers (other than estates and trusts), $500,000.

Limited exclusion for student loans. For discharges of debt after Dec. 31, 2017 and before Jan. 1, 2026, the amount of certain student loans that are discharged on account of death or total and permanent disability of the student is excluded from gross income. (Code Sec. 108(f))

Child tax credit increased. For tax years beginning after Dec. 31, 2017 and before Jan. 1, 2026, the child tax credit is increased to $2,000. (Code Sec. 24(h)(2)) Other modifications to the child tax credit are:

• The income levels at which the credit phases out are increased to $400,000 for married taxpayers filing jointly ($200,000 for all other taxpayers) (not indexed for inflation).
• A $500 nonrefundable credit is provided for certain non-child dependents.
• The amount of the credit that is refundable is increased to $1,400 per qualifying child, and this amount is indexed for inflation, up to the base $2,000 base credit amount. The earned income threshold for the refundable portion of the credit is decreased from $3,000 to $2,500.
• No credit is allowed to a taxpayer with respect to any qualifying child unless the taxpayer provides the child's SSN. (Code Sec. 24(h))

​New excess business loss limitation. For tax years beginning after Dec. 31, 2017 and before Jan. 1, 2026, the excess farm loss limitation of former Code Sec. 461(j) doesn't apply, and instead a noncorporate taxpayer's "excess business loss" is disallowed. Under the new rule, excess business losses are not allowed for the tax year but are instead carried forward and treated as part of the taxpayer's net operating loss (NOL) carryforward in subsequent tax years. This limitation applies after the application of the Code Sec. 469 passive loss rules. (Code Sec. 461(l))

An excess business loss for the tax year is the excess of aggregate deductions of the taxpayer attributable to the taxpayer's trades and businesses, over the sum of aggregate gross income or gain of the taxpayer plus a threshold amount. The threshold amount for a tax year is $500,000 for married individuals filing jointly, and $250,000 for other individuals, with both amounts indexed for inflation. (Code Sec. 461(l)(3))
For a partnership or S corporation, the new rule applies at the partner- or shareholder-level.

Gambling loss limit modified. For tax years beginning after Dec. 31, 2017 and before Jan. 1, 2026, the limit on wagering losses under Code Sec. 165(d) is modified to provide that all deductions for expenses incurred in carrying out wagering transactions, and not just gambling losses, are limited to the extent of gambling winnings. (Code Sec. 165(d))

Deduction for personal casualty & theft losses suspended. For tax years beginning after Dec. 31, 2017 and before Jan. 1, 2026, there's no itemized deduction for personal casualty and theft losses, except for personal casualty losses incurred in a Federally-declared disaster. (Code Sec. 165(h)(5)) However, where a taxpayer has personal casualty gains, the loss suspension doesn't apply to the extent that such loss doesn't exceed the gain.