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Legal Update: NEW TAX CUTS & JOBS ACT SUMMARY

January 9, 2018 |  Article By : 

The Act contains a lot of information and certainly cannot be summed up in one short article, but there are some provisions that are worth noting. You should consult with your tax advisor about things you may need to change/adjust in 2018 and the potential impact on both your personal and business finances.

 

  • Standard deduction increased to $12,000 for single filers and $24,000 for joint returns
  • $1,000-per-child credit will double to $2,000, with up to $14,000 available in IRS refunds for families who owe little or no taxes.
  • $10,000 cap on the deduction for state and local income tax for both single and married filers.
  • Mortgage interest deduction limited to loans up to $750,000 (down from $1 million).  Current loans are grandfathered in so the new limit only applies to new loans taken out after 12/14/17.  Can still refinance mortgage debts existing on 12/14/17 up to $1 million and still deduct the interest so long as the new loan does not exceed the amount being refinanced.
  • Interest remains deductible on second homes but subject to the same limits discussed above so interest is deductible on the first $750,000 of aggregate debt on both homes
  • Deduction eliminated for interest on a second mortgage securing a HELOC however interest is still deductible on home equity loans or second mortgages if the proceeds are used to substantially improve the residence.
  • Lowers top tax rate from 39.6 to 37 percent for individuals
  • Corporate tax rate will be reduced to a flat 21 percent
  • 20% deduction of pass-through business income (subject to some limitation) however there are some new restrictions on deductions for businesses
  • Exclusion of gain on sale of principal residence remains unchanged.
  • 1031 exchange for real property was retained
  • Estate tax threshold increased to $11 million per individual
  • Alternative minimum tax (AMT) exemptions and thresholds increased
 

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