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2018 year-end tax planning checklist

November 26, 2018

Article courtesy Yeo & Yeo

Yeo & Yeo’s Year-end Tax Planning Checklist provides action items that may help you save tax dollars if you act before year-end.

Year-end tax planning for 2018 takes place against the backdrop of legislative changes that fundamentally alter the tax rules for individuals and businesses. For 2018, the Tax Cuts and Jobs Act (TCJA) does away with many familiar, longstanding tax rules and introduces a host of new ones.

For businesses, the corporate tax rate is cut to 21%, the corporate AMT is gone, there are new limits on business interest deductions, and significantly liberalized expensing and depreciation rules. Plus, the domestic production activities deduction is repealed, although there is a new deduction for non-corporate taxpayers with qualified business income from pass-through entities. 

For individuals, there are new, lower income tax rates, a substantially larger standard deduction that for some makes up for severely limited itemized deductions and eliminated personal exemptions, an increased child tax credit, and a watered-down alternative minimum tax (AMT), among many other changes.  

Below are a few key changes impacting your 2018 income taxes:

For businesses:

  • A flat 21% tax rate for C corporations

  • 20% deduction for pass-through business owners

  • Repeal of the AMT ƒ 100% bonus depreciation and increased Section 179 expenses

  • A disallowance of entertainment expenses 

  • Net operating loss (NOL) cannot be carried back. Losses are subject to an 80% limitation Business interest expense is now limited to 30% of the adjusted taxable income. Small businesses with $25 million or less in gross receipts are exempt from this limitation.

For individuals:

  • Standard deduction increases to $24,000 for married filing jointly ($12,000 for single)

  • $10,000 maximum itemized deduction for income, property and sales taxes ƒ No deduction for home equity loans unless used for acquisition indebtedness

  • No deduction for miscellaneous itemized deductions (i.e., investment fees, unreimbursed employee business expenses, tax preparation fees)

  • Repeal of the personal exemptions

  • Increase in the alternative minimum tax (AMT)  exemption amount will eliminate AMT for most 

  •  taxpayers

  • Increase in child tax credit to $2,000 (subject to phase-out at much higher income limitations than in the past). A new $500 tax credit for each non-child dependent, which includes a child 17 and older, an ailing elderly parent or an adult child with a disability

  • Major overhaul in the actual tax forms!

Yeo & Yeo has a comprehensive guide and checklist available for download here.

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