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Tax News

 
The Tax Cuts and Jobs Act takes effect January 1, 2018. Following are answers to some questions we are sure you have on how the new bill affects your tax situation.

Be sure to ask your tax preparer for more information

Child Tax Credit

The maximum credit is increased from $1,000 per qualifying child under the age of 17 to $2,000

Capital Gain Tax Rates

 
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Capital Gains & Qualified Dividends
For 2017 income tax returns the tax on long-term capital gains (assets owned for more than one year) is calculated at a reduced tax rate of 15% for taxpayers in the 25 to 28% tax brackets. Taxpayers in the 10 and 15% income tax brackets pay 0% on long term gains. The new tax bill does not make any changes to the tax rate percentage but makes slight changes the tax brackets.

Itemized Deduction Limitation & Personal Exemptions

The new tax bill limits and eliminates some of the items that have been allowed as Itemized Deductions. Mortgage interest will only be deductible on the first $750,000 in principal value on the purchase of your home. Equity loan interest deductions are eliminated. Limits the state and local tax and property tax deduction to $10,000. The charitable contribution deduction is unchanged.

Education Credits

There have been two credits available for higher education, the American Opportunity Credit (AOC) and the Lifetime Learning Credit (LLC). The AOC credit is for the first 4 years of higher education with a maximum credit of $2,500 per student per year of which 40% is refundable. The LLC is equal to 20% of up to $10,000 with a maximum credit of $2,000.

We will post an update on this when the new tax bill is released.

Obamacare

In January 2018 taxpayers will begin receiving their tax information forms for 2017. If you are covered by health insurance you will receive one, two or all three of the following forms - 1095A - 1095B - 1095C. Please keep these forms and give to your tax preparer. They are necessary to prevent you from paying penalties on your health insurance coverage.The penalty for not having health insurance coverage will be reduced to $0 beginning January 1, 2019.

Tax Free Medical Benefits

Health care coverage provided by an employer for your children under 27 years of age is now generally tax-free to the employee. Previously, the child had to be under age 19 or under age 24 if a full-time student.

Bonus Depreciation and Section 179

Qualifying business assets purchased in 2016 through 2017 can be 100% deducted by taking advantage of the 50% bonus depreciation and Section 179 deductions.

Ask your preparer for more information.