TAXES New Rules in 2018

TAXES New Rules in 2018

by Susan Neuhalfen

Chances are you are already wrapping up your 2017 taxes and getting them ready for your CPA. The good news is most of the recently passed Tax Reform provisions kick in on January 1, 2018, which means that they won’t affect 2017 tax filings.

For your tax year 2018 filing, however, there are a lot of tax law changes to sort out.

“There are a lot of changes for 2018,” said Steve Buchanan of Buchanan & Co. PLLC, CPAs of Lantana. “You need to put a plan together now so you’re not surprised when you file your taxes next year.”

Here are just some of the changes that are part of the new tax plan:

Property Tax / Mortgage Changes

If you pay more than $10,000 in property tax, anything over and above that $10,000 is no longer deductible as an itemized deduction. The $10,000 deduction limit applies to the total of all your state and local taxes, including property tax.

Similarly, mortgage interest deductions are only allowed for new home purchases of up to $750,000. That means you can’t write off the interest on what you’ve mortgaged over and above $750k. This does not apply to existing mortgages. Additionally, interest on home equity loans or HELOCs are no longer tax deductible but IRS guidance on what home equity that may qualify is still being worked. There’s no grandfathering provision for existing home equity loans.

“If you’re making key changes in your life such as buying a new home, starting a business, or changing your business structure to hope to take advantage of the new law, talk to your tax advisor first,” said Buchanan. “We can help prepare you for those important decisions that often are expensive to undo or potentially permanently or temporarily irrevocable.”

Change in Tax Brackets, Deductions

The overall tax tables have gone down a bit for 2018, which helps most taxpayers. For most taxpayers the new 2018 tax brackets mean potentially more money in your pocket. Buchanan said that many of his clients have chosen to invest that money which, as a licensed investment advisor, is something he can handle for them.

Child Tax Credit

The new tax bill doubles the child tax credit from $1,000 to $2,000 for families earning up to $500,000.

There is also an allowance for those invested in the 529 college savings plan to pay up to $10,000 per year for K-12 schools. For example if you have a K-12 child in private school, you can dip into your 529 and pay for part of that tuition if you choose.

Some Business Changes

Businesses may be paying a lower tax rate but there is planning needed. According to Buchanan, you need to find out if your business is structured the right way to qualify for the recent tax cuts.

“There are a lot of layers to this, “ said Buchanan. “I have to know your fact pattern to advise if you qualify for the recent tax cuts for small businesses or if restructuring your business is advisable. It comes down to several factors including a provision that affects businesses providing services such as a doctor, lawyer, accountant, realtor, financial advisor, qualified business income, etc.” “Before running out to create a corporation or revoking an S-Election, talk to a CPA.”

“A lot of people ask me if they need to worry about the new tax laws and the short answer is ‘yes’,” said Buchanan. “The best thing is to seek advice from a good CPA or tax attorney to figure out the best plan for you and your family.” Buchanan cautions against making moves without an overall plan. He notes that tax planning should evolve with changes to tax code, economy, as well as changes to your personal situation, and your investment plan should be developed in concert with your tax planning.

Special Thanks to:

Buchanan & Company, PLLC
Certified Public Accountants
(940) 455-2084 •

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