Tax Law Changes

For any divorce or separation agreement executed after December 31, 2018, or executed before that date but modified after, alimony payments are not deductible by the payor spouse.

If a pre-existing agreement is modified after December 31, 2018, the new rules will only apply if the modification expressly provides that the new law should be applicable.

Correspondingly, the recipient spouse will not have to include the alimony payments received as income.

Gambling losses remain deductible as a miscellaneous itemized deduction (not subject to the 2% limitation) to the extent of gambling winnings.

The Act provides that all deductions for expenses incurred in carrying out wagering transactions, and not just gambling losses, are limited to the extent of gambling winnings.

For tax years beginning after December 31, 2017 and before January 1, 2026 all miscellaneous itemized deductions that were previously subject to a 2% AGI limitation are suspended.

Among the items included in this elimination are:
All unreimbursed employee business expenses;
Union dues
Brokerage fees
All expenses related to tax return preparation;
Appraisal fees for charitable contributions;
Investment expenses.

For contributions made in tax years beginning after December 31, 2017 and before January 1, 2026 the 50% limitation is increased to 60%. Any amounts in excess of the new limit can be carried forward and deducted for up to five years (as was allowed under prior law).

For any contribution made in a tax year beginning after December 31, 2016, the requirement of a charity to provide contemporaneous written acknowledgement as substantiation for any contribution of $250 or more is repealed.

Beginning in 2018, no charitable deduction is allowed for any payment to an institution of higher learning in exchange for which the contributor is given a right to purchase seats at an athletic event.

Prior to the enactment of the new law, charitable contributions were deductible with certain ceilings based upon a percentage of AGI. A 50% of AGI limit applied to cash contributions to public charities and certain private foundations.

The combination of residential property taxes and Income or sales taxes is 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.

For tax years beginning after December 31, 2017 and before January 1, 2026, the overall itemized deduction limitation of 3% of the excess of AGI over the threshold amount (applicable to certain itemized deductions) is suspended.

For tax years 2018 through 2025 the deduction for personal and dependency exemptions is effectively suspended by the Act reducing those amounts to zero.

The Act increases the base standard deduction from the inflation adjusted levels that applied in 2017 to:

$12,000 for Single, Qualifying widower and Married filing separately taxpayers.

$24,000 for married taxpayers filing Joint returns,

$18,000 for taxpayers filing as Head of Household.

The additional standard deduction available to taxpayers who are age 65 or older and or blind remain unchanged.
For 2018 the additional amount is $1,300 for married taxpayers and $1,600 for unmarried taxpayers.

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.