gmhTODAY 19 gmhToday April May 2018 - Page 58

Facts About the Tax Cut and Jobs Act, 2017 In late in 2017, the most signifi cant tax reform package since Ronald Reagan held offi ce was passed into law. While this bill started out as a way to make corporate tax rates more competitive, individual tax pay- ers are actually the bigger benefi ciary and will be the biggest contributors to the anticipated boost in GDP. According to estimates prepared by JP Morgan, the new bill may increase U.S. economic activity, i.e., Gross Domestic Product (GDP), by an additional 0.3% to 0.6% in 2018 and 0.2% in 2019. Individuals are more likely to spend their tax savings and that immediately translates into increased economic activity. Below are 10 highlights from the Tax Cut and Jobs act of 2017 that could benefi t you. Tax Rates Decrease at Most Income Levels Tax rates in 5 of the 7 income tiers have been lowered, and the top fi ve tiers have all shifted their thresholds higher so income is taxed at lower rates for longer. In 2018, the top rate is 37% and it doesn’t start until income reaches $600,000, which is down from the 2017 top rate of 39.6% on all income over $480,050. Standard Deduction Essentially Doubles By almost doubling the Standard Deduction from $6,350 to $12,000 for single fi lers, and from $12,700 to $24,000 for married couples fi ling jointly, many tax payers won’t have to itemize taxes to get sizable deductions. By Daniel T. Newquist, CFP®, AIF® Daniel T. Newquist, CFP®, AIF® is a Principal Wealth Advisor with RNP Advisory Services, Inc., in Morgan Hill with over 20 years experience advising clients on their personal wealth and business planning needs. Investment advisory services offered through RNP Advisory Services, Inc. – a registered investment advisor. Securities offered through Securities America, Inc., member FINRA/SIPC. RNP Advisory Services and Securities America are separate entities. The Invest- ment Fiduciary standard of care applies to advisory services only. dnewquist@ or call (408) 779-0699. AMT Going Away for Most Republicans wanted to do away with the Alternative Minimum Tax (AMT) but were unsuccessful in getting the math to work out. They did, however, make it harder for the AMT to get triggered on middle income earners. State and Local Taxes Deduction Limited to $10,000 The amount of state and local taxes that joint fi lers are able to deduct is now capped at $10,000. Previously, it was unlimited. This impacts tax payers that live in high income tax states or where property taxes are high. Mortgage Interest Deduction Limit Lowered The amount of mortgage interest that can be deducted is now limited to the interest paid on the fi rst $750,000 of a mortgage loan amount. The new lower limit only applies to mortgages issued after December 15, 2017. Any mortgage outstanding prior to that date will be held to the prior $1,000,000 limit. Eliminated Deductibility of Tax Preparer and Advisory Fees As a way of simplifying the tax code and offsetting some of the costs of the cuts, the tax act eliminates the Miscellaneous Itemized Deductions section of the tax code. The more popular deductions in this section were the deductibility of tax preparer and fi nancial advisory fees. Child Tax Credit Available to More People The Child Tax Credit is doubling from $1,000 to $2,000 per child under the age of 17. Additionally, more tax payers will be able to qualify for the full amount of the credit since the phaseout income limits is higher for single parent fi lers $200,000 (up from $75,000 in 2017) and $400,00 for married couples (up from $110,000 in 2017). Spend 529 Accounts on Elementary and Secondary School Previously, distributions from 529 accounts were tax free only when used to cover the costs of higher education. Starting in 2018, these funds can also be used to cover up to $10,000 of public, private or religious elementary or secondary school per year. Affordable Care Act: Mandate Gone, Tax Remains The mandate to have every American carry health insurance or pay a tax was removed. While it would seem that the government is losing money by no longer taxing the uninsured, the government will actually save hundreds of billions by no longer paying subsidies to the millions of people that qualify for them but don’t want health insurance. The 3.8% tax on net investment income for individuals with income over $200,000 and couples with income over $250,000 remains. Estate Tax Exemption Doubles The estate tax exemption doubles from 5.49 million dollars to 10.98 million dollars. This article is not intended as tax advice. Consult your tax professional regarding how the new tax law impacts your personal fi nancial situation. 58 GILROY • MORGAN HILL • SAN MARTIN APRIL/MAY 2018