Tax Law Changes

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).

Distributions from 529 plans to pay tuition in primary and secondary school up to $10,000 is not a taxable distribution.

Distributions from 529 plans can be rolled over tax free to ABLE accounts (up to annual contribution limits). Also annual contributions to ABLE accounts can be increased under certain circumstances.

For 2018, the limit on the adoption credit as well as the exclusion for employer-paid adoption assistance is $13,810. The benefit phaseout range is modified adjusted gross income between $207,140 to $247,140.

For 2018, the maximum credit amount is $3,461 for one qualifying child, $5,716 for two qualifying children, $6,431 for three or more qualifying children, and $519 for taxpayers who have no qualifying child. The phaseout ranges for the credit have been adjusted for inflation.

The adjusted gross income brackets for the 10%, 20%, and 50% credits are increased for 2018. No credit is allowed when AGI exceeds $31,500 for single taxpayers, $47,250 for heads of households, and $63,000 for married persons filing jointly. ABLE account contributions can now qualify for the credi

Section 280F limits the §179 expensing and depreciation deductions (including bonus depreciation) with respect to certain passenger automobiles.

For passenger automobiles placed into service after December 31, 2017 the maximum amount of allowable depreciation is increased to $10,000 for the first year;
$16,000 for the second year; $9,600 for the third year; and $5,760 for the fourth and later years. Each of these amounts will be indexed for inflation in years after 2018.

The maximum first-year bonus depreciation (which was scheduled to reduce to $6,400 in 2018 and $4,800 in 2019) will remain at $8,000.

For property placed into service after December 31, 2017, qualified leasehold improvement, qualified restaurant and qualified retail improvement property will be subject to a 15-year recovery period and straight-line depreciation.

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.

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%.

For tax years beginning after December 31, 2017 and before January 1, 2026, seven brackets will apply to individuals: 10%, 12%, 22%, 24%, 32%, 35% and 37%.

No change has been made to the filing statuses that apply to individuals.
In 2017 all taxpayers (other than those filing Married Filing Separately) became subject to the 35% bracket at the same level of taxable income ($416,700). For tax years beginning after December 31, 2017 and before January 1, 2026, the 2nd highest bracket will now apply based upon filing status.

1 Unmarried taxpayers will have the 35% bracket apply once taxable income exceeds $200,000.

2. Joint filers will have the 35% bracket apply once taxable income exceeds $400,000.

3. Separate filers will have the 35% bracket apply once taxable income exceeds $200,000.

4. For unmarried taxpayers (both Single and Head of Household filing statuses), the top bracket applies to taxable income in excess of $500,000.

5. Married taxpayers filing jointly will have the 37% rate apply once taxable income exceeds $600,000, with one-half that amount ($300,000) being the threshold for married taxpayers filing separate return.