What a wonderful time of the year! Celebrating Christmas and the New Year with family and friends, good food, memories of Christmas’ past and creating new memories. The New Year is a time for making resolutions and planning for changes we would like to experience in our lives in the coming year. With only four weeks remaining in 2018, we are running out of opportunities to take advantage of tax planning.

The Tax Cuts and Jobs Act (TCJA) passed by Congress on December 20, 2017, is the most significant change in the U.S. tax code since 1986. There are too many tax changes to detail them in this short article; needless to say, most taxpayers will be effected. A few of the changes effective 2018 are listed below:

1) The personal exemption is zero; the standard deduction has been increased to $24,000 for joint filers and $12,000 for single, likely eliminating the need to itemize for many.

2) Mortgage Interest is only deductible if related to acquisition of home, or directly related to improvements. Interest on Home Equity Lines of Credit (HELOC) is only deductible if the funds are used to buy, build, or substantially improve the house.

3) Miscellaneous Itemized Deductions, subject to the 2% limitation, are suspended. This includes investment advisory expense, unreimbursed employee business expenses, tax preparation fees, and certain other fees.

4) There is a new deduction for pass through income (related to self-employment income, partnerships, and S-Corp shareholders).

5) There is an expanded Child Tax Credit, which is available for qualified children under the age of 17. The bill doubles the credit from $1,000 to $2,000, and also increases the amount of the credit that is refundable to $1,400.

6) The deduction for entertainment expenses has been eliminated, business related meals are still deductible at 50%.

7) Penalties related to lack of health insurance are eliminated beginning 2019; however, taxpayers who do not have health insurance which is Affordable Care Act (ACA) compliant in 2018 are still subject to the penalty.

8) The tax rate for C corporations has been reduced to a flat rate of 21%.

Because of significant changes to the federal tax withholding tables, we advise all wage earners to check the federal income tax withholding on their pay stub to make sure the amounts withheld are consistent with the amount of tax they expect to owe.

Additional information relating to the 2018 tax changes can be found at https://www.irs.gov/tax-reform. We encourage all tax filers to be assembling tax papers, update financial records, make required estimated tax payments, and be aware of their 2018 tax liability.

Tommy Daugherty, CPA

Daugherty & Company, PLLC is a Knoxville based CPA firm which offers income tax projection (and a full range of accounting and tax) services and can assist in minimizing your 2018 individual or business income tax liability. Please let us know if you would like more information on any of these services. Our offices are located at 4421 Whittle Springs Rd, Suite B, Knoxville, 37917, near the I-640 and Broadway intersection. Call us at (865) 281-6510 to schedule a consultation, or email us at info@dcpllc.org.