The Tax Cuts and Jobs Act: Still Waiting for That Postcard

President Donald Trump signed the Tax Cuts and Jobs Act into law in December 2017. It made changes to the tax system, with the goal of making it simpler. Some parts of the tax code are easier, but others, especially for businesses, are more complicated. Many of the changes will expire in 2026. So, filing taxes on a postcard probably won’t happen anytime soon. The tax law changed the rates for individuals, trusts, and estates. It also increased the standard deduction but got rid of personal exemptions. Child tax credits went up and there are new limits on deductions for mortgage interest and state and local taxes. Some deductions for individuals and trusts were eliminated, but trustee and personal representative fees are still deductible. When an estate or trust ends and distributes all its assets, beneficiaries can use deductions on their tax returns. The rules for deducting medical expenses will change for 2017, 2018, and 2019. After 2018, alimony payments will no longer be tax deductible. If you’re getting a divorce, it might be better to finalize it before 2019. The alternative minimum tax (AMT) regime is still in place, but with higher exemptions and phase-outs. The corporate AMT has been repealed. People can now convert their traditional IRAs to Roth IRAs, with some tax implications. The new tax law also allows tax-free withdrawals from 529 plans for elementary and secondary school expenses, and eliminates the penalty for not having health insurance. The act also doubled the exclusions for estate, gift, and generation-skipping transfer taxes. In 2018, the tax law doubled the amount of money that wealthy people can give away without paying taxes. This change is set to expire in 2026, so some rich people are giving money to family members now to take advantage of the higher limit. There’s a possibility that they might have to pay taxes on those gifts later if the limit goes back down, but the government is expected to make rules to prevent that from happening. The law also lets a widow or widower use their deceased spouse’s unused tax exemption, but they have to file a special form to do it. Noncitizens and non-residents still have a lower tax exemption, and the limits for tax-free gifts have gone up a little bit. Starting in 2018, the U.S. changed the way it taxes businesses. They switched from a system where the tax rate went up as a company made more money to a flat tax rate of 21 percent for all C corporations. They also made changes to how companies can use their losses to lower their taxes in the future. Additionally, the law now requires a longer holding period for certain types of investment income to qualify for lower tax rates. There’s also a new deduction for certain business owners, which can lower their taxable income by up to 20 percent. This only applies to income from business activities within the U.S. The way the deduction is calculated is pretty complicated, and it depends on how much money the business makes and how much the owner makes. If you make less than $157,500 (or $315,000 if married), you can claim a 20 percent deduction on your business income. If you make between $157,500 and $207,500 (or between $315,000 and $415,000 if married), you can still get a partial deduction, but it goes down if you work in certain fields like law or medicine. If you make more than $207,500 (or $415,000 if married) and work in those fields, you can’t get the deduction. If you work in other types of business, your deduction is based on the wages you pay and the property you use. The new law also changes some tax deductions and credits, but most of these changes will expire in 2026. The Tax Cuts and Jobs Act has made the tax system more complicated, despite its goal of simplification. This will have long-term effects on taxpayers and tax professionals. The act includes provisions to reduce taxes on beer and wine for the next two years, which may have been Congress’s way of giving tax professionals a break. This is a list of tax code sections and regulations. It includes rules about IRA contributions, inflation measures, estate taxes, and business deductions. Some sections discuss specific types of businesses, like engineering and architecture firms. There are also rules about property exchanges and business expenses. These are important for understanding how taxes work, but may be confusing without more context. The tax law section of a legal group wrote an article about the 2017 Tax Act and estate planning. It was written by a person from Miami and another from Boca Raton, who are experts in tax law. The article talks about specific sections of the tax law.

Source: https://www.floridabar.org/the-florida-bar-journal/the-tax-cuts-and-jobs-act-still-waiting-for-that-postcard/