Outline of tax law changes

From Bogleheads
Jump to: navigation, search

H.R.1 - 115th Congress (2017-2018) modifies US taxation and became law on December 22, 2017. The following outline provides a topical overview of wiki articles related to this legislation.

Part I: Tax rate reform

Section Related Wiki Articles and Notes
Sec. 11001. Modification of rates

Part II—Deduction for qualified business income of pass-thru entities

Section Related Wiki Articles and Notes
Sec. 11011. Deduction for qualified business income.

Sec. 11012. Limitation on losses for taxpayers other than corporations.

For small business owners, but discussed in this Bogleheads® forum topic: [Pass-Thru Entities Questions Thread]

Part III: Tax benefits for families and individuals

Section Related Wiki Articles and Notes
Sec. 11021. Increase in standard deduction Personal exemptions and dependent exemptions will no longer exist.

The 2018 standard deduction amounts will be as follows:

  • Single or married filing separately: $12,000
  • Married filing jointly: $24,000
  • Head of household: $18,000

The additional standard deduction for people who have reached age 65 (or who are blind) is $1,300 for married taxpayers or $1,600 for unmarried taxpayers.

Sec. 11022. Increase in and modification of child tax credit The child tax credit is increased from $1,000 per child to $2,000 per child, with the phase out range not beginning until $200,000 of modified adjusted gross income ($400,000 if married filing jointly). Up to $1,400 of the credit (per child) will be refundable.
Sec. 11023. Increased limits for certain charitable contributions Expands the charitable contributions limit for the deduction for cash donations to public charities (and private operating foundations) to 60% of the taxpayer’s AGI.
Sec. 11024. Increased contributions to ABLE accounts If the annual contribution limit to the 529A ABLE account is capped out, the designated beneficiary may contribute to their 529A account, above and beyond the normal contribution limit, if they have earned income from employment. The maximum amount of employment income that can be contributed is the lesser of 100% of their compensation, or the Federal poverty line threshold for a one-person household (which is $12,060 in 2018). In addition, the beneficiary must not also be contributing to an employer retirement plan to be permitted to contribute their income to a 529A plan. If the designated beneficiary of the ABLE Account themselves is the one who actually makes the contributions, he/she will now be able to claim the Saver’s Credit, (now being expanded to ABLE accounts).
Sec. 11025. Rollovers to ABLE accounts from 529 programs Permits money in a 529 plan to be rolled over to a 529A ABLE account (without any non-qualified distribution penalties), as long as the 529A beneficiary is the same person (or a member of the same family) as the original 529 plan account. Rollovers are restricted to (and count towards) the annual contribution limit for ABLE accounts, which is the annual gift exclusion (rising to $15,000/year in 2018).
Sec. 11027. Temporary reduction of medical expense deduction floor The current 10%-of-AGI threshold for medical expense deductions is reduced to 7.5% of AGI, both for the 2017 tax year and the upcoming 2018 tax year. In addition, the medical expense threshold is adjusted to 7.5%-of-AGI for Alternative Minimum Tax (AMT) purposes in 2017 and 2018. After 2018, the medical expense deduction reverts back to the 10%-of-AGI threshold.
Sec. 11028. Relief for 2016 disaster areas Withdrawals from retirement plans

Part IV: Education

Section Related Wiki Articles and Notes
Sec. 11032. 529 account funding for elementary and secondary education Extends 529 qualified expenses to an elementary or secondary public, private, or religious school. Imposes a $10,000 expense cap.

Part V: Deductions and Exclusions

Section Related Wiki Articles and Notes
Sec. 11041. Suspension of deduction for personal exemptions For tax years beginning after Dec. 31, 2017 and before Jan. 1, 2026, the deduction for personal exemptions is suspended.
Sec. 11042. Limitation on deduction for state and local, etc. taxes The deduction for state and local taxes is limited to an aggregate amount of $10,000 for both property taxes on homes used for personal purposes, and either state income taxes or sales taxes.
Sec. 11043. Limitation for qualified residence interest For mortgages and home equity loans, only interest related to “acquisition indebtedness” will be deductible. This includes debt related to “acquiring, constructing, or substantially improving” your qualified residence.

For “acquisition indebtedness” taken out 12/16/2017 or later, only interest on the first $750,000 of the balance ($375,000 if married filing separately) will be deductible. For loans taken out on or before 12/15/2017, the old $1,000,000 limit ($500,000 if married filing separately) will apply.

Sec. 11044. Modification of personal casualty losses Deductions for “personal casualty losses” will be deductible only if the losses are attributable to a declared national disaster. "Declared disaster” means any disaster subsequently determined by the President of the United States to warrant assistance by the Federal Government under the Robert T. Stafford Disaster Relief and Emergency Assistance Act. [1].
Sec. 11045. Suspension of miscellaneous itemized deductions No miscellaneous deductions are allowed. Investment advisory fees ("wrap fees") are in this category.
Sec. 11046. Suspension of overall limitation on itemized deductions. Repeals IRC Section 68, commonly known as the Pease limitation (named for the Senator who originated the rule). The Pease limitation phased out 3% of a taxpayer’s itemized deductions once income crossed a certain threshold (in 2017, those with more than $261,500 of AGI as individuals, or $313,800 as married couples). The repeal sunsets after 2025.
Sec. 11048. Suspension of exclusion for qualified moving expense reimbursement. US military excluded.
Sec. 11051. Repeal of deduction for alimony payments Applies only to agreements executed after 2018; for pre-2019 agreements, alimony paid in 2019 and later is still deductible to the payer and taxable to the recipient.

Part VI: Increase in estate and gift tax exemption

Section Related Wiki Articles and Notes
Sec 11061. Increase in estate and gift tax exemption The base exclusion amount is increased from $5 million to $10 million.

Individual mandate

Section Related Wiki Articles and Notes
Sec. 11081. Individual mandate is repealed Beginning in 2019, the individual mandate (i.e., the penalty for not having health insurance) will disappear.

Alternative Minimum Tax

Section Related Wiki Articles and Notes
Sec. 12003. Increased exemption for individuals The AMT exemption amount will be increased to:
  • $70,300 for single people and people filing as head of household,
  • $109,400 for married people filing jointly, and
  • $54,700 for married people filing separately.

Retirement plans

Section Related Wiki Articles and Notes
Sec. 13611. Repeal of Roth IRA recharacterizations Repeals the rules permitting recharacterizations of Roth conversions, effective starting in 2018. Recharacterizations of Roth contributions are permitted for those who mistakenly make a new Roth contribution and later discover they’re over the income limits.
Sec. 13613. Extended rollover period for plan loan offset amounts. The deadline for completing a loan rollover to a qualified employer plan or IRA is now extended to the due date (including extensions) for the individual’s tax return for the year in which the loan balance was treated as a distribution. This “deemed distribution” treatment occurs when payment of an outstanding loan balance is accelerated at the time the plan is terminated or at the time the participant terminates employment.

Notes

  1. The revised tax rate tables are as follows:

    (View Google Spreadsheet in browser, then File --> Download as to download the file.)

See also

References

External links