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2018-Earned income tax credit
Asked Thursday, December 20, 2018 by an anonymous userCPA Answer:
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
2018-IRS mileage allowance
Asked Thursday, December 20, 2018 by an anonymous userCPA Answer:
The IRS standard business mileage rate for 2018 is 54.5 cents a mile
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The rate for medical expense and moving expense for certain military personnel deductions is 18 cents a mile.
For charitable volunteers the mileage rate is unchanged at 14 cents a mile.
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The rate for medical expense and moving expense for certain military personnel deductions is 18 cents a mile.
For charitable volunteers the mileage rate is unchanged at 14 cents a mile.
2018-Child Tax Credit
Asked Thursday, December 20, 2018 by an anonymous userCPA Answer:
Pursuant to the Act, the child tax credit is increased to $2,000 per eligible child for 2018 through 2025.
The income level at which the credit phase-out begins is increased to $400,000 for taxpayers filing married filing jointly and $200,000 for all others. The credit continues to phase out at a rate of $50 for every $1,000 that AGI exceeds the threshold amounts.
The refundability of the credit was also modified so that the earned income threshold is reduced to $2,500.
The income level at which the credit phase-out begins is increased to $400,000 for taxpayers filing married filing jointly and $200,000 for all others. The credit continues to phase out at a rate of $50 for every $1,000 that AGI exceeds the threshold amounts.
The refundability of the credit was also modified so that the earned income threshold is reduced to $2,500.
2018-Premium tax credit
Asked Thursday, December 20, 2018 by an anonymous userCPA Answer:
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. 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.
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.
2018-Sale of Residence exclusion
Asked Thursday, December 20, 2018 by an anonymous userCPA Answer:
The rules relating to the exclusion of gain on the sale of a principal residence remained unchanged. $500,000 for married couples and $250,000 for the other filing status.
2018-The Pass-Thru Entity Deduction
Asked Thursday, December 20, 2018 by an anonymous userCPA Answer:
One of the changes imposed by the Tax Cuts and Jobs Act is the creation of new Section 199A, “Qualified Business Income”.
This new code section, non-corporate taxpayers (including trusts and estates) that have Qualified Business Income (“QBI”) from a partnership, S Corporation or sole proprietorship can take a deduction of up to 20% of the QBI.
QBI is generally defined as the net amount of income, gain, deduction and loss relating to a qualified trade or business and effectively connected to the conduct of the trade or business within the United States.
If the net amount is less than zero, the amount is treated as a loss from a qualified trade or business in the succeeding tax year.
Certain types of income are specifically excluded from being treated as QBI, and thus not eligible for the deduction. Investment income along with reasonable compensation payments, guaranteed payment to a partner for services rendered and payments for services to partners not acting in their capacity as partners are not included.
The deduction is a deduction from AGI in arriving at Taxable Income. It is not an or above the line deduction.
A limitation is imposed on income from certain specified service businesses, including businesses that perform services in the fields of health, law, accounting, actuarial science, performing arts, consulting, athletics, financial services, brokerage services, investing and investment management, trading or dealing with securities and any trade or business where the principal asset of such trade or business is the reputation or skill of one or more of its employees or owners.
Specifically exempt from the definition of service business are engineering and architectural services.
For pass-through income from a service business, a limitation phases in when the owner’s taxable income (from all sources) exceeds $157,500 for single taxpayers and $315,000 for married taxpayers filing joint returns and is completely phased-out when taxable income exceeds $207,500 and $415,000 respectively.
A second limitation applies based upon W-2 wages and capital of a trade or business. In general, the deduction cannot exceed the greater of 50% of the W-2 wages of the business; or the sum of 25% of the W-2 wages paid plus 2.5% of the unadjusted basis, immediately after acquisition, of all “qualified property”.
Qualified property is defined as all tangible, depreciable property held by and used by the business at the close of the year.
The limitation based on W-2 wages and capital does not apply to any passthru entity owner with taxable income that does not exceed the $157,500/$315,000 threshold. Once income exceeds this amount, the W2/Capital limitation phases in and applies fully once the taxpayer’s taxable income exceeds the $207,500/$415,000 threshold
This new code section, non-corporate taxpayers (including trusts and estates) that have Qualified Business Income (“QBI”) from a partnership, S Corporation or sole proprietorship can take a deduction of up to 20% of the QBI.
QBI is generally defined as the net amount of income, gain, deduction and loss relating to a qualified trade or business and effectively connected to the conduct of the trade or business within the United States.
If the net amount is less than zero, the amount is treated as a loss from a qualified trade or business in the succeeding tax year.
Certain types of income are specifically excluded from being treated as QBI, and thus not eligible for the deduction. Investment income along with reasonable compensation payments, guaranteed payment to a partner for services rendered and payments for services to partners not acting in their capacity as partners are not included.
The deduction is a deduction from AGI in arriving at Taxable Income. It is not an or above the line deduction.
A limitation is imposed on income from certain specified service businesses, including businesses that perform services in the fields of health, law, accounting, actuarial science, performing arts, consulting, athletics, financial services, brokerage services, investing and investment management, trading or dealing with securities and any trade or business where the principal asset of such trade or business is the reputation or skill of one or more of its employees or owners.
Specifically exempt from the definition of service business are engineering and architectural services.
For pass-through income from a service business, a limitation phases in when the owner’s taxable income (from all sources) exceeds $157,500 for single taxpayers and $315,000 for married taxpayers filing joint returns and is completely phased-out when taxable income exceeds $207,500 and $415,000 respectively.
A second limitation applies based upon W-2 wages and capital of a trade or business. In general, the deduction cannot exceed the greater of 50% of the W-2 wages of the business; or the sum of 25% of the W-2 wages paid plus 2.5% of the unadjusted basis, immediately after acquisition, of all “qualified property”.
Qualified property is defined as all tangible, depreciable property held by and used by the business at the close of the year.
The limitation based on W-2 wages and capital does not apply to any passthru entity owner with taxable income that does not exceed the $157,500/$315,000 threshold. Once income exceeds this amount, the W2/Capital limitation phases in and applies fully once the taxpayer’s taxable income exceeds the $207,500/$415,000 threshold
2018-The Pass-Thru Entity Deduction
Asked Thursday, December 20, 2018 by an anonymous userCPA Answer:
One of the changes imposed by the Tax Cuts and Jobs Act is the creation of new Section 199A, “Qualified Business Income”.
This new code section, non-corporate taxpayers (including trusts and estates) that have Qualified Business Income (“QBI”) from a partnership, S Corporation or sole proprietorship can take a deduction of up to 20% of the QBI.
QBI is generally defined as the net amount of income, gain, deduction and loss relating to a qualified trade or business and effectively connected to the conduct of the trade or business within the United States.
If the net amount is less than zero, the amount is treated as a loss from a qualified trade or business in the succeeding tax year.
Certain types of income are specifically excluded from being treated as QBI, and thus not eligible for the deduction. Investment income along with reasonable compensation payments, guaranteed payment to a partner for services rendered and payments for services to partners not acting in their capacity as partners are not included.
The deduction is a deduction from AGI in arriving at Taxable Income. It is not an or above the line deduction.
A limitation is imposed on income from certain specified service businesses, including businesses that perform services in the fields of health, law, accounting, actuarial science, performing arts, consulting, athletics, financial services, brokerage services, investing and investment management, trading or dealing with securities and any trade or business where the principal asset of such trade or business is the reputation or skill of one or more of its employees or owners.
Specifically exempt from the definition of service business are engineering and architectural services.
For pass-through income from a service business, a limitation phases in when the owner’s taxable income (from all sources) exceeds $157,500 for single taxpayers and $315,000 for married taxpayers filing joint returns and is completely phased-out when taxable income exceeds $207,500 and $415,000 respectively.
A second limitation applies based upon W-2 wages and capital of a trade or business. In general, the deduction cannot exceed the greater of 50% of the W-2 wages of the business; or the sum of 25% of the W-2 wages paid plus 2.5% of the unadjusted basis, immediately after acquisition, of all “qualified property”.
Qualified property is defined as all tangible, depreciable property held by and used by the business at the close of the year.
The limitation based on W-2 wages and capital does not apply to any passthru entity owner with taxable income that does not exceed the $157,500/$315,000 threshold. Once income exceeds this amount, the W2/Capital limitation phases in and applies fully once the taxpayer’s taxable income exceeds the $207,500/$415,000 threshold
This new code section, non-corporate taxpayers (including trusts and estates) that have Qualified Business Income (“QBI”) from a partnership, S Corporation or sole proprietorship can take a deduction of up to 20% of the QBI.
QBI is generally defined as the net amount of income, gain, deduction and loss relating to a qualified trade or business and effectively connected to the conduct of the trade or business within the United States.
If the net amount is less than zero, the amount is treated as a loss from a qualified trade or business in the succeeding tax year.
Certain types of income are specifically excluded from being treated as QBI, and thus not eligible for the deduction. Investment income along with reasonable compensation payments, guaranteed payment to a partner for services rendered and payments for services to partners not acting in their capacity as partners are not included.
The deduction is a deduction from AGI in arriving at Taxable Income. It is not an or above the line deduction.
A limitation is imposed on income from certain specified service businesses, including businesses that perform services in the fields of health, law, accounting, actuarial science, performing arts, consulting, athletics, financial services, brokerage services, investing and investment management, trading or dealing with securities and any trade or business where the principal asset of such trade or business is the reputation or skill of one or more of its employees or owners.
Specifically exempt from the definition of service business are engineering and architectural services.
For pass-through income from a service business, a limitation phases in when the owner’s taxable income (from all sources) exceeds $157,500 for single taxpayers and $315,000 for married taxpayers filing joint returns and is completely phased-out when taxable income exceeds $207,500 and $415,000 respectively.
A second limitation applies based upon W-2 wages and capital of a trade or business. In general, the deduction cannot exceed the greater of 50% of the W-2 wages of the business; or the sum of 25% of the W-2 wages paid plus 2.5% of the unadjusted basis, immediately after acquisition, of all “qualified property”.
Qualified property is defined as all tangible, depreciable property held by and used by the business at the close of the year.
The limitation based on W-2 wages and capital does not apply to any passthru entity owner with taxable income that does not exceed the $157,500/$315,000 threshold. Once income exceeds this amount, the W2/Capital limitation phases in and applies fully once the taxpayer’s taxable income exceeds the $207,500/$415,000 threshold
2018-Bonus Depreciation
Asked Thursday, December 20, 2018 by an anonymous userCPA Answer:
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 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%.
2018-Itemized deductions-$10,000 State Property & Income tax Limitation
Asked Thursday, December 20, 2018 by an anonymous userCPA Answer:
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.
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.
2018- Standard Deduction
Asked Thursday, December 20, 2018 by an anonymous userCPA Answer:
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.
$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.