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New Tax Law - Tax Cuts and Jobs Act
The following is a summary of the new tax legislation entitled “Tax Cuts and Jobs Act” as it affects Individual tax changes for years after 2017: These changes do not affect the 2017 tax returns. Also, please be aware that this list of changes is not comprehensive and does not address all the details covered in the act. Rather, it only addresses most of the major individual tax issues. It does not address business tax changes or estate tax changes as part of the Act. It is provided as general information only and is not guaranteed to be free of miss-statements, errors or missing details. As always, it is very important that you first consult with your tax advisor before relying upon or following any of these guidelines or making any decisions based upon this information.
Redesign of the form 1040 tax form
While the prior 1040 form has now been reduced from two full pages to two half-sized pages, new for 2018 will be six brand new supplemental schedules which then feed back into the shorter summarized form 1040. In essence, all that really happened here is that line items which were removed from the form 1040 were simply moved off into their own separate supporting schedules which will now consist of:
Schedule 1 - for additional sources of income, other than W-2, or adjustments to income.
Schedule 2 - for other forms of taxes.
Schedule 3 - for non-refundable tax credits.
Schedule 4 - for adding up certain taxes, such as self-employment tax.
Schedule 5 - for adding up of tax payments, estimated tax payments and extensions payments.
Schedule 6 - for use in appointing a third-party designee to discuss tax return with IRS on behalf of taxpayer.
New Income Tax Rates & Brackets
To determine regular tax liability, an individual must use the appropriate tax rate schedule. The Code provides four tax rate schedules for individuals based on filing status as being single, married filing jointly/surviving spouse, married filing separately, and head of household.
New law. For tax years beginning after Dec. 31, 2017 and before Jan. 1, 2026, seven tax rates apply to individuals. These are: 10%, 12%, 22%, 24%, 32%, 35%, and 37%. The specific application of these rates, and the income brackets at which they apply are as follows:
For married individuals filing joint returns and surviving spouses:
If taxable income is: The tax is:
Not over $19,050 10% of taxable income
Over $19,050 but less than $77,400 $1,905 plus 12% of the excess over $19,050
Over $77,400 but less than $165,000 $8,907 plus 22% of the excess over $77,400
Over $165,000 but less than $315,000 $28,179 plus 24% of the excess over $165,000
Over $315,000 but less than $400,000 $64,179 plus 32% of the excess over $315,000
Over $400,000 but less than $600,000 $91,379 plus 35% of the excess over $400,000
Over $600,000 $161,379 plus 37% of the excess over $600,000
For single individuals (other than heads of household and surviving spouses):
If taxable income is: The tax is:
Not over $9,525 10% of taxable income
Over $9,525 but less than $38,700 $952.50 plus 12% of the excess over $9,525
Over $38,700 but less than $82,500 $4,453.50 plus 22% of the excess over $38,700
Over $82,500 but less than $157,500 $14,089.50 plus 24% of the excess over $82,500
Over $157,500 but less than $200,000 $32,089.50 plus 32% of the excess over $157,000
Over $200,000 but less than $500,000 $45,689.50 plus 35% of the excess over $200,000
Over $500,000 $150,689.50 plus 37% of the excess over $500,000
For heads of household:
If taxable income is: The tax is:
Not over $13,600 10% of taxable income
Over $13,600 but less than $51,800 $1,360 plus 12% of the excess over $13,600
Over $51,800 but less than $82,500 $5,944 plus 22% of the excess over $51,800
Over $82,500 but less than $157,500 $12,698 plus 24% of the excess over $82,500
Over $157,500 but less than $200,000 $30,698 plus 32% of the excess over $157,000
Over $200,000 but less than $500,000 $44,298 plus 35% of the excess over $200,000
Over $500,000 $149,298 plus 37% of the excess over $500,000
For marrieds filing separately:
If taxable income is: The tax is:
Not over $9,525 10% of taxable income
Over $9,525 but less than $38,700 $952.50 plus 12% of the excess over $9,525
Over $38,500 but less than $82,500 $4,453.50 plus 22% of the excess over $38,700
Over $82,500 but less than $157,500 $14,089.50 plus 24% of the excess over $82,500
Over $157,500 but less than $200,000 $32,089.50 plus 32% of the excess over $157,000
Over $200,000 but less than $300,000 $45,689.50 plus 35% of the excess over $200,000
Over $300,000 $80,689.50 plus 37% of the excess over $500,000
Standard Deduction Increase
New law. For tax years beginning after Dec. 31, 2017 and before Jan. 1, 2026, the standard deduction is increased to $24,000 for married individuals filing a joint return, $18,000 for head-of-household filers, and $12,000 for all other taxpayers, adjusted for inflation in tax years beginning after 2018. No changes are made to the current-law additional standard deduction for the elderly and blind which will remain.
Personal Exemptions will be Gone
New law. For tax years beginning after Dec. 31, 2017 and before Jan. 1, 2026, the deduction for personal exemptions has been terminated.
New Measure of Inflation Now Used
Tax bracket amounts, standard deduction amounts, personal exemptions, and various other tax figures are annually adjusted to reflect inflation. Under pre-Act law, the measure of inflation was CPl-U (Consumer Price lndex).
New law. For tax years beginning after Dec. 31, 2017 dollar amounts that were previously indexed using CPl-U will instead be indexed using chained C-CPl-U which grows at a slower pace than CPI-U because it takes into account a consumer’s ability to substitute between goods in response to changes in relative prices. Proponents for the use of chained CPI say that CPI-U overstates increases in the cost of living because it doesn’t take into account the fact that consumers generally adjust their buying patterns when prices go up, rather than simply buying an item at a higher price.
Kiddie Tax Changed
Under pre-Act law, under the "kiddie tax" provisions, the net unearned income of a child was taxed at the parents’ tax rates if the parents’ tax rates were higher than the tax rates of the child. The remainder of a child’s taxable income (i.e., earned income, plus unearned income up to $2,100 (for 2018), less the child's standard deduction) was taxed at the child's rates. The kiddie tax applied to a child if: (1) the child had not reached the age of 19 by the close of the tax year, or the child was a full-time student under the age of 24, and either of the child’s parents was alive at such time; (2) the child's unearned income exceeded $2,100 (for 2018); and (3) the child did not file a joint return.
New law. For tax years beginning after Dec. 31, 2017, the taxable income of a child attributable to earned income is taxed under the rates for single individuals, and taxable income of a child attributable to net unearned income is taxed according to the brackets applicable to trusts and estates.
Capital Gains Provisions
The adjusted net capital gain of a non-corporate taxpayer (e.g., an individual) is taxed at maximum rates of 0%, 15%, or 20%. Under pre-Act law, the 0% capital gain rate applied to adjusted net capital gain that otherwise would be taxed at a regular tax rate below the 25% rate (i.e., at the 10% or 15% ordinary income tax rates); the 15% capital gain rate applied to adjusted net capital gain in excess of the amount taxed at the 0% rate, that otherwise would be taxed at a regular tax rate below the 39.6% (i.e., at the 25%, 28%, 33% or 35% ordinary income tax rates); and the 20% capital gain rate applied to adjusted net capital gain that exceeded the amounts taxed at the 0% and 15% rates.
New law. The Act generally retains current-law maximum rates on net capital gains and qualified dividends. It retains the breakpoints that exist under pre-Act law, but indexes them for inflation using C-CPI-U in tax years after Dec. 31, 2017.
For 2018, the 15% breakpoint is: $77,200 for joint returns and surviving spouses (half this amount for married taxpayers filing separately), $51,700 for heads of household, $2,600 for trusts and estates, and $38,600 for other unmarried individuals. The 20% breakpoint is $479,000 for joint returns and surviving spouses (half this amount for married taxpayers filing separately), $452,400 for heads of household, $12,700 for estates and trusts, and $425,800 for other unmarried individuals.
Deduction for Personal Casualty & Theft Losses are Gone
New law. For tax years beginning after Dec. 31, 2017 and before Jan. 1, 2026, the personal casualty and theft loss deduction is suspended, except for personal casualty losses incurred in a Federally-declared disaster. However, where a taxpayer has personal casualty gains, the loss suspension doesn’t apply to the extent that such loss doesn’t exceed the gain.
Gambling Loss Limitation Modified
In general, taxpayers can claim a deduction for wagering losses to the extent of wagering winnings.However, under pre-Act law, other deductions connected to wagering (e.g., transportation, admission fees) could be claimed regardless of wagering winnings.
New law. For tax years beginning after Dec. 31, 2017 and before Jan. 1, 2026, the limitation on wagering losses is modified to provide that all deductions for expenses incurred in carrying out wagering transactions, and not just gambling losses, are limited to the extent of gambling winnings.
Child Tax Credit Increased
New law. For tax years beginning after Dec. 31, 2017 and before Jan. 1, 2026, the child tax credit is increased to
$2,000, and other changes are made to phase-outs and refundability during this same period.
State and Local Tax Deduction is Now Limited
New law. For tax years beginning after Dec. 31, 2017 and before Jan. 1, 2026, subject to the exception described below, state, local, and foreign property taxes, and state and local sales taxes, are deductible only when paid or accrued in carrying on a trade or business or an activity generally for the production of income. State and local income, war profits, and excess profits are not allowable as a deduction.
However, a taxpayer may claim an itemized deduction of up to $10,000 ($5,000 for a married taxpayer filing a separate return) for the aggregate of (i) state and local property taxes not paid or accrued in carrying on a trade or business or activity; and (ii) state and local income, war profits, and excess profits taxes (or sales taxes in lieu of income, etc. taxes) paid or accrued in the tax year. Foreign real property taxes may not be deducted.
Prepayment provision. For tax years beginning after Dec. 31, 2016, in the case of an amount paid in a tax year beginning before Jan. 1, 2018 with respect to a state or local income tax imposed for a tax year beginning after Dec. 31, 2017, the payment will be treated as paid on the last day of the tax year for which such tax is so imposed for purposes of applying the above limits. In other words, a taxpayer who, in 2017, pays an income tax that is imposed for a tax year after 2017, can’t claim an itemized deduction in 2017 for that prepaid income tax.
Mortgage and Home Equity Indebtedness Interest Deduction Limitation
New law. For tax years beginning after Dec. 31, 2017 and before Jan. 1, 2026, the deduction for interest on home equity indebtedness is suspended, and the deduction for mortgage interest is limited to underlying indebtedness of up to $750,000 ($375,000 for married taxpayers filing separately).
Treatment of indebtedness incurred on or before Dec. 15, 2017. The new lower limit doesn’t apply to any acquisition indebtedness incurred before Dec. 15, 2017. “Binding contract” exception. A taxpayer who has entered into a binding written contract before Dec. 15, 2017 to close on the purchase of a principal residence before Jan. 1, 2018, and who purchases such residence before Apr. 1, 2018, shall be considered to incur acquisition indebtedness prior to Dec. 15, 2017.
Refinancing. The $1 million/$500,000 limitations continue to apply to taxpayers who refinance existing qualified residence indebtedness that was incurred before Dec. 15, 2017, so long as the indebtedness resulting from the refinancing doesn't exceed the amount of the refinanced indebtedness.
Medical Expense Deduction Threshold Temporarily Reduced
New law. For tax years beginning after Dec. 31, 2016 and ending before Jan. 1, 2019, the threshold on medical expense deductions is reduced to 7.5% for all taxpayers. (was previously 10%)
Charitable Contribution Deduction Remains
The charitable contribution deduction will remain. However, from a practical standpoint, given the doubling of the standard deduction thresholds along with the elimination of other itemized deductions that would otherwise help a taxpayer exceed these standard deduction thresholds means that fewer taxpayers will derive any additional tax benefit from charitable giving for years after 2017, unless those contribution amounts are significantly high enough as to exceed the standard deduction amount in which case only the portion of charitable contribution that exceeds that limit will result in any additional tax deduction savings.
Alimony Deduction by Payor/Inclusion by Payee Suspended
Under pre-Act law, alimony and separate maintenance payments were deductible by the payor spouse and includible in income by the recipient spouse.
New law. For any divorce or separation agreement executed after Dec. 31, 2018, or executed before that date but modified after it (if the modification expressly provides that the new amendments apply), alimony and separate maintenance payments are not deductible by the payor spouse and are not included in the income of the payee spouse. Rather, income used for alimony is taxed at the rates applicable to the payor spouse.
Miscellaneous Itemized Deductions is Suspended
New law. For tax years beginning after Dec. 31, 2017 and before Jan. 1, 2026, the deduction for miscellaneous itemized deductions that are subject to the 2% of Adjusted Gross Income floor is suspended.
Overall Limitation on Itemized Deductions is Suspended
Under pre-Act law, higher-income taxpayers who itemized their deductions were subject to a limitation on these deductions. For taxpayers who exceed the threshold, the otherwise allowable amount of itemized deductions was reduced by 3% of the amount of the taxpayers’ adjusted gross income exceeding the threshold. The total reduction couldn't be greater than 80% of all itemized deductions, and certain itemized deductions were exempt.
New law. For tax years beginning after Dec. 31, 2017 and before Jan. 1, 2026, the limitation on itemized
deductions is suspended.
Exclusion for Moving Expense Reimbursements Suspended
Under pre-Act law, an employee could exclude qualified moving expense reimbursements from his or her gross income and from his or her wages for employment tax purposes. These were any amount received (directly or indirectly) from an employer as payment for (or reimbursement of) expenses which would be deductible as moving expenses if directly paid or incurred by the employee.
New law. For tax years beginning after Dec. 31, 2017 and before Jan. 1, 2026, the exclusion for qualified moving expense reimbursements is suspended, except for members of the Armed Forces on active duty (and their spouses and dependents) who move pursuant to a military order and incident to a permanent change of station.
Moving Expenses Deduction Suspended
Under pre-Act law, taxpayers could claim a deduction for moving expenses incurred in connection with starting a new job if the new workplace was at least 50 miles farther from a taxpayer’s former residence than the former place of work.
New law. For tax years beginning after Dec. 31, 2017 and before Jan. 1, 2026, the deduction for moving expenses is suspended, except for members of the Armed Forces on active duty who move pursuant to a military order
Repeal of Affordable Care Act Individual Mandate
Under pre-Act law, the Affordable Care Act (also called the ACA or Obamacare) required that individuals who were not covered by a health plan that provided at least minimum essential coverage were required to pay a "shared responsibility payment" (also referred to as a penalty) with their federal tax return. Unless an exception applied, the tax was imposed for any month that an individual did not have minimum essential coverage.
New law. For months beginning after Dec. 31, 2018, the amount of the individual shared responsibility payment is reduced to zero.
However, The Act leaves intact the 3.8% net investment income tax and the 0.9% additional Medicare tax, both enacted as part of the Affordable Care Act
AMT Retained, but with Higher Exemption Amounts
New law. For tax years beginning after Dec. 31, 2017 and before Jan. 1, 2026, the Act increases the AMT exemption amounts for individuals as follows:
. . . For joint returns and surviving spouses, $109,400.
. . . For single taxpayers, $70,300.
. . . For marrieds filing separately, $54,700.
Under the Act, the above exemption amounts are reduced (not below zero) to an amount equal to 25% of the amount by which the AMTI of the taxpayer exceeds the phase-out amounts, increased as follows:
. . . For joint returns and surviving spouses, $1 million.
. . . For all other taxpayers (other than estates and trusts), $500,000.
For trusts and estates, the base figure of $22,500 and phase-out amount of $75,000 remain unchanged. All of these amounts will be adjusted for inflation after 2018 under the new C-CPI-U inflation measure (see above).
ABLE Account Changes
ABLE Accounts under Code Sec. 529A provide individuals with disabilities and their families the ability to fund a tax preferred savings account to pay for "qualified" disability related expenses. Contributions may be made by the person with a disability (the "designated beneficiary"), parents, family members or others. Under pre-Act law, the annual limitation on contributions is the amount of the annual gift-tax exemption ($15,000 in 2018).
New law. Effective for tax years beginning after the enactment date and before Jan. 1, 2026, the contribution limitation to ABLE accounts with respect to contributions made by the designated beneficiary is increased, and other changes are in effect as described below. After the overall limitation on contributions is reached (i.e., the annual gift tax exemption amount; for 2018, $15,000), an ABLE account's designated beneficiary can contribute an additional amount, up to the lesser of (a) the Federal poverty line for a one-person household; or (b) the individual's compensation for the tax year.
Recordkeeping requirements. The Act also requires that a designated beneficiary (or person acting on the beneficiary's behalf) maintain adequate records for ensuring compliance with the above limitations.
For distributions after the date of enactment, amounts from qualified tuition programs (QTPs, also known as 529 accounts; see below) are allowed to be rolled over to an ABLE account without penalty, provided that the ABLE account is owned by the designated beneficiary of that 529 account, or a member of such designated beneficiary's family. Such rolled-over amounts are counted towards the overall limitation on amounts that can be contributed to an ABLE account within a tax year, and any amount rolled over in excess of this limitation is includible in the gross income of the distributee.
Expanded Use of 529 Account Funds
Under pre-Act law, funds in a Code Sec. 529 college savings account could only be used for qualified higher education expenses. If funds were withdrawn from the account for other purposes, each withdrawal was treated as containing a pro-rata portion of earnings and principal. The earnings portion of a nonqualified withdrawal was taxable as ordinary income and subject to a 10% additional tax unless an exception applied.
"Qualified higher education expenses" included tuition, fees, books, supplies, and required equipment, as well as reasonable room and board if the student was enrolled at least half-time. Eligible schools included colleges, universities, vocational schools, or other postsecondary schools eligible to participate in a student aid program of the Department of Education. This included nearly all accredited public, nonprofit, and proprietary (for-profit) postsecondary institutions.
New law. For distributions after Dec. 31, 2017, "qualified higher education expenses" include tuition at an elementary or secondary public, private, or religious school, up to a $10,000 limit per tax year.
Student Loan Discharged on Death or Disability
Gross income generally includes the discharge of indebtedness of the taxpayer. Under an exception to this general rule, gross income does not include any amount from the forgiveness (in whole or in part) of certain student loans, if the forgiveness is contingent on the student’s working for a certain period of time in certain professions for any of a broad class of employers.
New law. For discharges of indebtedness after Dec. 31, 2017 and before Jan. 1, 2026, certain student loans that are discharged on account of death or total and permanent disability of the student are also excluded from gross income
New Deferral Election for Qualified Equity Grants
Code Sec. 83 governs the amount and timing of income inclusion for property, including employer stock, transferred to an employee in connection with the performance of services. Under Code Sec. 83(a), an employee must generally recognize income for the tax year in which the employee’s right to the stock is transferable or isn’t subject to a substantial risk of forfeiture. The amount includible in income is the excess of the stock’s fair market value at the time of substantial vesting over the amount, if any, paid by the employee for the stock.
New Law. Generally effective with respect to stock attributable to options exercised or restricted stock units
(RSUs) settled after Dec. 31, 2017 (subject to a transition rule; see below), a qualified employee can elect to defer, for income tax purposes, recognition of the amount of income attributable to qualified stock transferred to the employee by the employer. The election applies only for income tax purposes; the application of FICA and FUTA is not affected.
The election must be made no later than 30 days after the first time the employee's right to the stock is substantially vested or is transferable, whichever occurs earlier. If the election is made, the income has to be included in the employee's income for the tax year that includes the earliest of:
1. The first date the qualified stock becomes transferable, including, solely for this purpose, transferable to the employer.
2. The date the employee first becomes an "excluded employee" (i.e., an individual: (a) who is one-percent owner of the corporation at any time during the 10 preceding calendar years; (b) who is, or has been at any prior time, the chief executive officer or chief financial officer of the corporation or an individual acting in either capacity; (c) who is a family member of an individual described in (a) or (b); or (d) who has been one of the four highest compensated officers of the corporation for any of the 10 preceding tax years.
3. The first date on which any stock of the employer becomes readily tradable on an established securities market;
4. The date five years after the first date the employee's right to the stock becomes substantially vested; or
5. The date on which the employee revokes his or her election. (Code Sec. 83(i)(1)(B), as amended by Act Sec. 13603(a))
The election is available for "qualified stock" attributable to a statutory option. In such a case, the option is not treated as a statutory option, and the rules relating to statutory options and related stock do not apply. In addition, an arrangement under which an employee may receive qualified stock is not treated as a nonqualified deferred compensation plan solely because of an employee’s inclusion deferral election or ability to make the election.
Deferred income inclusion also applies for purposes of the employer’s deduction of the amount of income attributable to the qualified stock. That is, if an employee makes the election, the employer's deduction is deferred until the employer’s tax year in which or with which ends the tax year of the employee for which the amount is included in the employee's income as described in (1) - (5) above.
The new election applies for qualified stock of an eligible corporation. A corporation is treated as such for a tax year if: (1) no stock of the employer corporation (or any predecessor) is readily tradable on an established securities market during any preceding calendar year, and (2) the corporation has a written plan under which, in the calendar year, not less than 80% of all employees who provide services to the corporation in the US (or any US possession) are granted stock options, or restricted stock units (RSUs), with the same rights and privileges to receive qualified stock. Detailed employer notice, withholding, and reporting requirements also apply with regard to the election.
As noted above, the income deferral election generally applies with respect to stock attributable to options exercised or RSUs settled after Dec. 31, 2017. However, under a transition rule, until IRS issues regs or other guidance implementing the 80% and employer notice requirements under the provision, a corporation will be treated as complying with those requirements if it complies with a reasonable good faith interpretation of them. The penalty for a failure to provide the notice required under the provision applies to failures after Dec. 31, 2017.
Repeal of the Rule Allowing Recharacterization of IRA Contributions
Under pre-Act law, if an individual makes a contribution to an IRA (traditional or Roth) for a tax year, the individual is allowed to recharacterize the contribution as a contribution to the other type of IRA (traditional or Roth) by making a trustee-to-trustee transfer to the other type of IRA before the due date for the individual's income tax return for that year. In the case of a recharacterization, the contribution will be treated as having been made to the transferee IRA (and not the original, transferor IRA) as of the date of the original contribution. Both regular contributions and conversion contributions to a Roth IRA can be recharacterized as having been made to a traditional IRA.
New law. For tax years beginning after Dec. 31, 2017, the rule that allows a contribution to one type of IRA to be recharacterized as a contribution to the other type of IRA does not apply to a conversion contribution to a Roth IRA. Thus, recharacterization cannot be used to unwind a Roth conversion.
Extended Rollover Period for Rollover of Plan Loan Offset Amounts
If an employee stops making payments on a retirement plan loan before the loan is repaid, a deemed distribution of the outstanding loan balance generally occurs. Such a distribution is generally taxed as though an actual distribution occurred, including being subject to a 10% early distribution tax, if applicable. A deemed distribution isn’t eligible for rollover to another eligible retirement plan.
Under pre-Act law, a plan may also provide that, in certain circumstances (for example, if an employee terminates employment), an employee's obligation to repay a loan is accelerated and, if the loan is not repaid, the loan is cancelled and the amount in employee’s account balance is offset by the amount of the unpaid loan balance, referred to as a loan offset. A loan offset is treated as an actual distribution from the plan equal to the unpaid loan balance (rather than a deemed distribution), and (unlike a deemed distribution) the amount of the distribution is eligible for tax free rollover to another eligible retirement plan within 60 days. However, the plan is not required to offer a direct rollover with respect to a plan loan offset amount that is an eligible rollover distribution, and the plan loan offset amount is generally not subject to 20% income tax withholding.
New law. For plan loan offset amounts which are treated as distributed in tax years beginning after Dec. 31, 2017, the Act provides that the period during which a qualified plan loan offset amount may be contributed to an eligible retirement plan as a rollover contribution would be extended from 60 days after the date of the offset to the due date (including extensions) for filing the Federal income tax return for the tax year in which the plan loan offset occurs - that is, the tax year in which the amount is treated as distributed from the plan. A qualified plan loan offset amount is a plan loan offset amount that is treated as distributed from a qualified retirement plan, a Code Sec. 403(b) plan, or a governmental Code Sec. 457(b) plan solely by reason of the termination of the plan or the failure to meet the repayment terms of the loan because of the employee’s separation from service, whether due to layoff, cessation of business, termination of employment, or otherwise. A loan offset amount under the Act (as before) is the amount by which an employee's account balance under the plan is reduced to repay a loan from the plan
Certain Self-Created Property Not Treated as Capital Asset
Under pre-Act law, property held by a taxpayer (whether or not connected with the taxpayer's trade or business) is generally considered a capital asset under Code Sec. 1221(a). However, certain assets are specifically excluded from the definition of a capital asset, including inventory property, depreciable property, and certain self-created intangibles (e.g., copyrights, musical compositions).
New law. Effective for dispositions after Dec. 31, 2017, the Act amends Code Sec. 1221(a)(3), resulting in the exclusion of patents, inventions, models or designs (whether or not patented), and secret formulas or processes, which are held either by the taxpayer who created the property or by a taxpayer with a substituted or transferred basis from the taxpayer who created the property (or for whom the property was created), from the definition of a "capital asset."
Estate and Gift Tax Retained, with Increased Exemption Amount
A gift tax is imposed on certain lifetime transfers and an estate tax is imposed on certain transfers at death.
Under pre-Act law, the first $5 million (as adjusted for inflation in years after 2011) of transferred property was exempt from estate and gift tax. For estates of decedents dying and gifts made in 2018, this "basic exclusion
amount" was $5.6 million ($11.2 million for a married couple).
New law. For estates of decedents dying and gifts made after Dec. 31, 2017 and before Jan. 1, 2026, the Act
doubles the base estate and gift tax exemption amount from $5 million to $10 million. The $10 million amount is indexed for inflation occurring after 2011 and is expected to be approximately $11.2 million in 2018 ($22.4 million per married couple).
Time To Contest IRS Levy Extended
The IRS is authorized to return property that has been wrongfully levied upon. Under pre-Act law, monetary proceeds from the sale of levied property could generally be returned within nine months of the date of the levy.
New law. For levies made after the date of enactment; and for levies made on or before the date of enactment if the 9-month period has not expired as of the date of enactment, the 9-month period during which IRS may return the monetary proceeds from the sale of property that has been wrongfully levied upon is extended to two years. The period for bringing a civil action for wrongful levy is similarly extended from nine months to two years.
Business Tax Reporting Changes Under this Act, Including Pass-Through Entities are Extensive
However, that is beyond the scope of this summary which was intended to only provide an overview of the issues affecting individual tax filing.
