One of the biggest surprises in the new tax is that of Alimony:

  • Effective 2019 Alimony is no longer deductible by the payer spouse and includible in income by the recipient spouse. This rule only applies for divorce or separation instruments executed on or before December 3, 2018 but modified after that date to include these new provisions.

Bicycle Commuting Reimbursement

Wagering Losses

  • The meaning of losses from wagering transactions is clarified to include other expenses incurred by the individual in connection with the conduct of that individual’s gambling activity such as travel expenses to or from a casino.

Affordable Care Act

  • The penalty for failing to maintain minimum essential coverage for individuals (individual mandate) is repealed beginning in 2019.

IRA Re-characterizations

  • The special rule allowing a contribution to one type of IRA to be re characterized as a contribution to the other type of IRA no longer applies to a conversion contribution to a Roth IRA.
  • Thus, re characterization cannot be used to unwind a Roth conversion. However, re characterization is still permitted with respect to other contributions. For example, an individual may make a contribution for a year to a Roth IRA and, before the due date for the individual’s income tax return for that year, re characterize it as a contribution to a traditional IRA.
  • In addition, an individual may still make a contribution to a traditional IRA and convert the traditional IRA to Roth IRA.

Sexual Harassment or Sexual Abuse Settlements

  • Effective December 23, 2017, this new law adds the following to the list of non-deductible expenses:
  • No deduction is allowed for any settlement payout, or attorney fees related to sexual harassment or sexual abuse if such payments are subject to a nondisclosure agreement.

Tax Rate Schedule for C Corporations (Form 1120)

  • Effective 2018, for tax years beginning after 2017, all taxable income of a C Corporation is taxed at a flat rate of 21%. There is no longer a separate tax rate for personal service corporations. There is no longer a separate maximum tax rate on net long-term capital gains.
  • The 70% dividends received deductions is reduced to 50%. The 80% dividends received deduction is reduced to 65%.
  • Special rules apply to the normalization method of accounting for regulated public utilities.

BonusĀ Depreciation

  • The prior law phase-down of bonus depreciation still applies for property acquired before September 28, 2017 but placed in service after September 28, 2017. The new law increases the bonus depreciation to 100% for property acquired (and placed in service) after September 27, 2017, with a new phase-down schedule for years after 2022. For a taxpayer’s first year ending after September 27, 2017 (the 2017 tax year for calendar year taxpayers), a taxpayer can elect to apply the 50% allowance instead of the 100% allowance.
  • New and Used Property – The new law removes the requirement that the original use of qualified property must commence with the taxpayer. Thus, bonus depreciation is allowed for both new and used property.

 

There you have it, these three blogs have given you the nuts and bolts of most of the tax changes that apply to the average tax payer… This new law overhauls the Internal Revenue Code by lowering tax rates and eliminating numerous tax provisions. Supporters claim that it will help the economy and create jobs. Critics point out that according to the House and Senate Conference Committee report, the new law will add $1,456 trillion to the federal deficit during the years 2018 through 2027. Supports claim that figure will partially offset through future economic growth, resulting in potential new tax revenue. We will have to see how this all plays out. In the meantime, give Bourke Accounting a call at 502-451-8773 or stop by and see us so we can help you with all of your tax and accounting needs. See you soon!