A day doesn’t go by that I don’t get a call or email from a client asking what changed with the “tax reform” legislation late last month, and how it affects them.
The Tax Cut & Jobs Act (Public Law 115-97) made radical changes to the US Tax Code. The significance will vary from person to person depending on a number of individual circumstances. As professionals we do not take any political position regarding the changes; rather, our job is to ensure tax returns are properly prepared in accordance with the law and that our clients receive the greatest benefit possible under the law.
Although the act is now law, the IRS as not yet issued any regulations, rules or guidance on it and we expect it will be a few months until that happens. It is a large and complex piece of legislation that will require the IRS to work with Congress to ensure that the intent is properly interpreted in rules and regulations.
Here is a summary of some of the most impacted areas:
- Tax rates changed, and the brackets (income levels) at which those rates are effective.
- There is significant difference in the treatment and taxability of income from different types of tax entities (LLC’s, partnerships, S Corporations) reported
- d on a personal tax return
- The standard deduction has doubled
- Certain income and expenses will be treated differently: medical expenses; mortgage interest; state and local taxes (including real estate and income taxes
- Changes to tax credits, including for children
Changes to personal tax returns are effective 1/1/2018 and are temporary (they expire in 2025 at which time the rates and rules revert back notwithstanding interim legislation). Changes to business tax rates are permanent.
Tax planning this year will be very important, especially for those that operate businesses. We look forward to assisting you.