What you should know about the new tax law Part I: The basics

1. THE standard deduction is doubled: Republicans want to simplify our tax code so more people can claim standard deductions instead of more complicated itemized deductions. This becomes a reality after the new law doubled the standard deduction from $6,350 to $12,000 for single filers, from $9,350 to $18,000 for heads of households, and from $12,700 to $24,000 for married couples filing jointly.

2. The personal exemption is gone: Old law allows you to claim a $4,050 personal exemption for yourself, your spouse and each of your dependents, which lowered your taxable income. You can no longer claim exemptions when you file your 2018 taxes in 2019.

3. The child tax credit is expanded: The child tax credit has doubled from $1,000 to $2,000 for children through age 16. It’s also now available to single taxpayers who earn $200,000 and married couples who earn to $400,000.

4. A new tax credit for non-child dependents is introduced: Taxpayers may now claim a new $500 temporary credit for non-child dependents. This can apply to a number of people adults support, such as elderly parents, children over age 17, or adult children with a disability.

5. Obamacare penalty for not having health insurance is gone: Republicans failed to repeal Obamacare but managed to get rid of the individual mandate which penalizes people who do not have health care insurance (effective in 2019).

6. Tax brackets stay at seven tax brackets but rates changed: President Trump pushed to simplify tax computation by reducing brackets from seven to three but could not muster enough support so we are stuck with the old seven tax brackets. On a good note, rates for some of these brackets were lowered.

7. Capital gains exclusion on the sale of your home sellers remains the same: Homeowners who sell their primary home for a gain will still be able to exclude up to $500,000 ($250,000 for single filers) from capital gains (as long as they lived there for two of the past five years).

8. Electric car tax credit survives: You can still claim a credit of up to $7,500 for your plug-in electric car. Credit is good only on the first 200,000 electric cars sold by each automaker.

9. Charitable contributions survive and sweetened with a bigger deduction limit from to 50% to 60% of Adjusted Gross Income.

10. Moving and Entertainment Expenses: The Act denies a deduction for all entertainment-related expenses and disallows a deduction for all moving expenses.

11. Kiddie Tax Simplified: The child’s tax is no longer affected by the tax situation of the child’s parent or the unearned income of any siblings. Taxable income attributable to net unearned income is taxed according to the brackets applicable to trusts and estates, without the benefit of the 12% rate bracket.

12. Sexual Harassment or Sexual Abuse Settlements: The Act provides that no deduction is allowed for any settlement, payout, or attorney fees related to sexual harassment or sexual abuse if such payments are subject to a nondisclosure agreement.

 

* * *

 

Victor Santos Sy graduated Cum Laude from UE with a BBA and from Indiana State University with an MBA. Vic worked with SyCip, Gorres, Velayo (SGV – Andersen Consulting) and Ernst & Young before establishing Sy Accountancy Corporation in Pasadena, California.

 

* * *

 

He has 50 years of experience in defending taxpayers audited by the IRS, FTB, EDD, BOE and other governmental agencies.  He is publishing a book on his expertise – “HOW TO AVOID OR SURVIVE IRS AUDITS.” Our readers may inquire about the book or email tax questions at vicsy@live.com.

 

 

No Comments Yet

Leave a Reply

Your email address will not be published.

FOLLOW US ON