Merging Personal Exemptions into an Expanded Standard


Deduction Under the new rules, the Standard Deduction will be $12,000 for individuals and $24,000 for married couples, as compared to just $6,350 for individuals and $12,700 for married couples under the old law (in 2017). And the “additional standard deduction” amount (an extra $1,600 (single filer)/$1,300 (joint filer) for a blind individual, or over age 65)


will continue to apply as well. Personal Exemptions have been eliminated.


mized Dedu Property Tax Deductions


$10,000 Cap on State & Local Income Tax &


Taxpayers can deduct their combined state/local property and income taxes, but only up to a cap of $10,000


combined. The $10,000 limit applies for both individuals and married couples (an indirect marriage penalty for high-income couples), and is reduced to $5,000 for those who are married filing separately.


New “Qualified Business Income” 20% Deduction


for Pass-Through Entities


Pass-through businesses will be taxed on only 80% of their pass-through income (or, alternatively, will


effectively be taxed at only 80% of the normal tax bracket rate on all their business income). However, the new rules permitting deductions for


pass-through businesses are complex and have a number of restrictions in place. Business owners are going to need the assistance of a super advisor team to navigate through this complex issue.


Families should also appreciate the efforts of Captain Tax Slayer, because he was able to expand the Child Tax Credit of $1,000 per qualifying child under the age of 17, up to a Child Tax Credit of $2,000 per qualifying child (of which $1,400 is a refundable credit). In addition, the income phaseout rules for the Child Tax


Credit are dramatically increased, from the old thresholds of $75,000 for individuals and $110,000 for married couples, up to $200,000 for individuals and $400,000 for married couples. Keep in mind, however, these thresholds will not be indexed for inflation.


Schools & Homeschooling As a strong proponent of education, Captain Tax Slayer expanded the use of 529 plan distributions. They can now be used tax free for private elementary and secondary school expenses (for up to $10,000 in distributions per student each year). The new provisions include both public, private, or religious schools and homeschooling expenses.


529 Plans for Private


Temporarily Expanded Medical Expense Deductions for 2017 & 2018


The 10%-of-AGI threshold for medical expense deductions is reduced to just 7.5% of AGI, both retroactively for the 2017 tax year and the 2018 tax year. After 2018, the medical expense deduction reverts back to the 10%-of-AGI threshold.


Roth


Recharacterizations of Prior Conversions


Repealed


The Tax Cuts and Jobs Act repeals the rules permitting recharacterizations of Roth conversions, effective starting in 2018. Notably, though, the rule only limits recharacterizations of Roth conversions (and not of Roth contributions), permitting those who mistakenly make a new Roth contribution and later discover they’re over the income limits to recharacterize it back to a traditional IRA. But Roth conversions cannot be recharacterized anymore.


hese are just a few of the changes in the tax code as a result of the Tax Cuts and Jobs Act of 2017. To learn more about how these and other changes affect you, contact your Ambassador Advisors representative.


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Doubled Tax Exemptions


The TCJA doubles the unified estate and gift tax exemption amounts from their current levels, which turns the otherwise-scheduled-to-be- $5.6M exemption in 2018 into an $11.2M individual estate tax exemption (or $22.4M for married couples with portability).


Estate & Gift


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