Tax Cuts & Jobs Act

Individual Tax Provisions

A deduction will no longer be allowed for personal exemptions. However, the standard deduction is increased to $24,400 for married filing joint, $18,350 for head-of-household, and $12,200 for single filers (adjusted annually). The additional standard deduction for the elderly and blind remains unchanged.

The personal casualty and theft loss deduction is suspended, except for personal casualty losses incurred in a Federally-declared disaster.

The child tax credit is increased to $2,000. The income levels at which the credit phases out are increased to $400,000 for married taxpayers filing jointly and $200,000 for all other taxpayers. In addition, a $500 nonrefundable credit is provided for certain non-child dependents.

An individual's total state income tax and property tax deductions are limited to a maximum $10,000 ($5,000 for a married taxpayer filing a separate return).

The interest on home equity loans (HELOCs) is now deductible only to the extent that the loan proceeds are used to substantially improve a home. Regular mortgage interest remains deductible, but is now limited to underlying indebtedness of up to $750,000 ($375,000 for married taxpayers filing separately).

The threshhold on medical expense deductions is reduced to 7.5% for all taxpayers. It was previously 10% for individuals under the age of 65.

For any divorce or separation agreement executed after Dec. 31, 2018, alimony and separate maintenance payments are not deductible by the payor spouse and are not included in the income of the payee spouse.

Miscellaneous itemized deductions that are subject to the 2% floor are no longer allowed.

The deduction for moving expenses is suspended, 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.

Beginning after Dec. 31, 2018, the individual shared responsibility created under Obamacare is eliminated.

The 3.8% net investment income tax and the 0.9% additional Medicare tax remain in effect.

The Alternative Minimum Tax (AMT) is kept in place, but the AMT exemption amounts for individuals increased as follows: For joint returns and surviving spouses, $109,400. For single taxpayers, $70,300. For married filing separately, $54,700.

For most other pass-through entities, sole proprietorships, and certain rental real estate businesses, a new Qualified Business Income Deduction (QBID) was created to reduce the tax paid at the individual level for income related to those entities. The deduction, which may be as much as 20% of the net income derived from a pass-through entity, is taken on the individual's Form 1040. Note: there is a complex series of limitations that may apply. Contact your tax advisor to determine how this deduction might benefit you.

The corporate dividends received deduction has been reduced to 50% from less-than-20%-owned domestic corporations, and 65% for 20%-or-more-owned domestic corporations.

For property placed in service in tax years beginning after Dec. 31, 2017, the maximum amount a taxpayer may expense under Code Section 179 is increased to $1 million, and the phase-out threshold amount is increased to $2.5 million.

100% first-year basis reduction is allowed for qualified property placed in service after Sept. 27, 2017, and before Jan. 1, 2023
80% for property placed in service after Dec. 31, 2022 and before Jan. 1, 2024.
60% for property placed in service after Dec. 31, 2023 and before Jan. 1, 2025.
40% for property placed in service after Dec. 31, 2024 and before Jan. 1, 2026.
20% for property placed in service after Dec. 31, 2025 and before Jan. 1, 2027

For property placed in service after Dec. 31, 2017, the cost recovery period is shortened from seven to five years for any machinery or equipment (other than any grain bin, cotton ginning asset, fence, or other land improvement) used in a farming business, the original use of which begins with the taxpayer.

For property placed in service after Dec. 31, 2017, the separate definitions of qualified leasehold improvement, qualified restaurant, and qualified retail improvement property are eliminated.

For tax years beginning after Dec. 31, 2017, every business, regardless of its form, is limited to a deduction for net interest expense of 30% of the business's adjusted taxable income for the tax year.

For Net Operating Losses (NOLs) arising in tax years ending after Dec. 31, 2017, the two-year carryback and the special carryback provisions are repealed. A two-year carryback applies in the case of certain losses incurred in the trade or business of farming. In addition, for losses arising in tax years beginning after Dec. 31, 2017, the NOL deduction is limited to 80% of taxable income. However, carryovers to other years are adjusted to take account of this limitation, and, with some exceptions, NOLs may be carried forward now indefinitely.

For tax years beginning after Dec. 31, 2017, the Domestic Production Activities Deduction (DPAD) is repealed.

For transfers after Dec. 31, 2017, the deferral of gain on like-kind exchanges is modified to allow for like-kind exchanges only for real property that is not held primarily for sale.

For amounts incurred or paid after Dec. 31, 2017, deductions for entertainment expenses are disallowed. The current 50% deduction limit on business meals will now include meals provided through an in-house cafeteria or on the premises of the employer. Also, deductions for employee transportation (e.g., parking and mass transit) are no longer allowed. However, the amounts may still be excluded from income by the employee.

For estates of decedents and gifts made after Dec. 31, 2017, the lifetime gift tax exemption is increased to $10 million per individual and $20 million per married couple. It is now indexed for inflation as well.

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