Federal Tax Law Changes Impacting Individuals – 2018
Well everyone has been asking about the Federal Tax Law Changes Impacting Individuals – 2018 and here is the first comprehensive discussion of the topic that we have seen. A thorough read makes it quite clear that the legislation benefits multi-millionaires and billionaires, not the “middle class” at least the way most of us understand the term. The goodies are contained in reduced taxes on investment income, capital gains, and income from pass-thru entities. Not the items contained in “Rosie the Riveter’s” tax return.
The last-minute revisions to the bill included one change that pertains to individual taxation. A provision which would have allowed Section 529 account funds to be used for home-school expenses was struck from the bill prior to the Senate vote. The bill has taken shape at break neck pace over the past two months, making it difficult for even seasoned tax practitioners to know exactly where things stand. The bill itself is massive and contains many tax law changes, some of which are extremely complex, and many of which go into effect in a matter of weeks.
This Special Report explains the changes that affect the taxation of individuals. In addition to providing a summary of the changes, it also clearly sets out the effective dates (which in many cases include an expiration date, or “sunset”), the Code section(s) affected, the bill’s section number, and a recitation of prior law to put the amendment into context. This information will help practitioners prepare for the year ahead, which will likely include squeezing in last-minute tax planning moves in 2017 to take advantage of provisions still on the books that won’t be available next year.
For example, a taxpayer who will itemize in 2017 but will likely be taking the larger standard deduction next year may benefit from making charitable contributions this year instead of next and from accelerating certain discretionary medical expenses into this year, for which a retroactively lower “floor” limiting medical expense deductions is in effect. In many cases, 2017 itemizing taxpayers should pay all of 2017 state and local taxes (“SALT”) this year (even if the due date for the last installment is in 2018) and consider making prepayments (e.g., of property taxes) in light of the significant reduction in the SALT deduction going into effect next year.
Many taxpayers should also consider ways of deferring income to take advantage of the lower rates going into effect next year. This report sets out all of these changes, as well as many others including dramatic changes to the tax treatment of alimony and a new rule that disallows the use of a recharacterization to unwind Roth IRA conversions.