Tax Law Changes

For tax years beginning January 1, 2019, medical expenses, for all taxpayers, are deductible to the extent that they exceed 10% of youir AGI. It was 7.5% of AGI in 2018.

In addition, the AMT preference related to medical expenses is eliminated.

For 2018, the contribution limit for traditional IRAs and Roth IRAs is unchanged at $5,500, or $6,500 for those age 50 or older.

The deduction limit for 2018 contributions to a traditional IRA is phased out for active plan participants with modified AGI (MAGI) between $63,000 and $73,000 for a single person or head of household, or between $101,000 and $121,000 for married persons filing jointly and qualifying widows/widowers.

The phaseout range is MAGI between $189,000 and $199,000 for a spouse who is not an active plan participant and who files jointly with a spouse who is an active plan participant.

The 2018 Roth IRA contribution limit is phased out for a single person or head of household with MAGI between $120,000 and $135,000, and for married persons filing jointly and qualifying widows/widowers with MAGI between $189,000 and $199,000.

If you converted your traditional IRA to a Roth IRA in 2018, you cannot undo it; the conversion is permanent.

The combination of residential property taxes and Income or sales taxes continues to be capped at $10,000.

Property taxes remain fully deductible for taxpayers in a business or for-profit activity, so taxes paid on rental realty can be taken in full on Schedule E.

Personal casualty losses occurring in a tax year beginning after December 31, 2017 but before January 1, 2026 are not deductible, unless the loss is incurred as a result of a federally-declared disaster.

Salary reduction deferrals $19,000 for 401(k) or 403(b) and most 457 plans. Catch-up Contributions $6,000

IRA Contributions $6,000 - IRA Catch-up Contributions remains at $1,000.

For 2018, you are required to have minimum essential health coverage through an employer plan, a government program, or other plan, or pay a penalty unless you are exempt from this requirement.

The penalty amount for 2018 is the higher of (1) 2.5% of household income above your filing threshold, or (2) $695 per person in your household ($347.50 per dependent child under age 18), up to a maximum of $2,085. The mandate does not apply after 2018.

To help those of modest means pay premiums for coverage obtained from a government exchange (Marketplace), there’s a premium tax credit. Eligibility for this advanceable, refundable tax credit depends on your household income and other factors.

The credit continues to be available even though the individual mandate ends after 2018.

If you claimed the credit in advance when you obtained coverage for 2018, you have to reconcile what you already applied toward your premiums with what you are actually entitled to; the difference is reported on your tax return.

If you did not receive the credit in advance but are eligible for a credit, you can claim it on your return.

If you do not claim the premium tax credit and qualify for Trade Adjustment Assistance (TAA), you may qualify for the health coverage tax credit of 72.5% of premiums (25.14).

For decedents dying and gifts made after 2017 and before 2026 the basic exemption equivalent exclusion amount is increased to $10,000,000 (with inflation adjustments).

For 2018, the exclusion amount is $11,200,000 per taxpayer or with proper planning $22,400,000 for a married couple.

100% additional first-year bonus depreciation is allowed for qualified property acquired and placed into service after September 27, 2017 and before January 1, 2023.

The new rules eliminate the requirement that the original use of the property commence with the taxpayer. As such, bonus depreciation is available for new or used property.

Taxpayers have a right to elect 50% bonus depreciation for property placed into service after September 27, 2017 during the first tax year that ends after September 27, 2017.
In the years that follow the bonus depreciation percentage will diminish. i. For property placed into service after December 31, 2022 and before January 1, 2024 bonus depreciation is 80%.
ii. For property placed into service after December 31, 2023 and before January 1, 2025 bonus depreciation is 60%.
iii. For property placed into service after December 31, 2024 and before January 1, 2026 bonus depreciation is 40%.
iv. For property placed into service after December 31, 2025 and before January 1, 2027 bonus depreciation is 20%.

The PATH Act permanently extended the enhanced $500,000 maximum amount of expensing available (along with the $2,000,000 phase-out threshold) under §179.

Under the new law, for property placed into service in tax years beginning after December 31, 2017, the maximum amount of expensing is increased to $1,000,000, and the phase-out threshold amount is increased to $2,500,000.

For tax years after 2018 these amounts will be indexed for inflation.