Tax changes for 2018 - double the standard deduction; eliminate all exemptions; reduce the top marginal rate; no changes to capital gain treatment; ask your employer how to submit a new W-4 tax withholding statement!
Individual and business tax law changes have been enacted for 2018. This will affect tax returns submitted in 2019. Returns filed in 2018 will follow rules and regulations of recent years. Most taxpayers will see a decrease in tax due under the new law - a few may see an increase.
Major business change - Section 1031 treatment (like kind exchanges) which allowed the trade-in of a truck, for example, on a replacement without recognizing gain, has ended for personal property. It continues for real property. This is a significant change! However, most personal property can now be expensed without depreciating over many years.
If you operate a business as a proprietorship, partnership, S Corp or LLC, you will be entitled to shelter 20% of your Qualified Business Income (QBI) from income tax in 2018. However, many personal service businesses will not be eligible.
Residents of NY, NJ and DE, all high graduated tax rate states, will fare worse than PA residents under the new law because PA is a relatively low, flat rate state.
Pennsylvania is one of the friendliest states for retirees - NJ and NY are not. PA taxes no part of social security benefits and does not tax retirement benefits in most cases. Florida has no personal income tax. However, it is important to establish residency in FL.
An IRA for 2017 may be opened as late as the regular filing deadline in April, 2018. Most other retirement plans must be established in 2017 in order to claim a deduction on your 2017 income tax return. Opening and funding earlier results in greater tax deferred growth.
Health Insurance legislation - As of January 1, 2018, the IRS has advised that 2017 tax returns filed in 2018 will be rejected if health insurance coverage information is not provided.. The penalty for not having credible health insurance (the mandate) has been eliminated for years after 2018 pursuan to the new tax law. If you purchased health insurance and received a federal subsidy, be aware that if your actual income is higher than the income amount you estimated, you will probably receive a smaller refund or have a premium tax due when your income tax return is submitted. Premium Tax Credit, Form 8962, must be part of your tax return if you purchased health insurance through the federal government's exchange. In addition, you may receive a Form 1095-B or 1095-C from your employer or insurance company. If you purchased insurance from a marketplace insurer you will receive Form 1095-A which is needed to prepare Form 8962. The basic penalty for not having health insurance is currently$695 per adult. In most cases, the family maximum penalty is $2,085. Some reasons for an exemption must be approved by governmental agencies - some can be claimed on your tax return without advance approval.
A. Under age 59 1/2? There are multiple ways to tap your IRA without incurring the 10% excess tax penalty.
B. Have a small business "on the side"? Is it really a business or is it a hobby? The distinction makes a huge difference when reporting for tax purposes.
If you have unused passive losses from rental properties you own, recover and use the losses when you sell your property.
Tips you can use, below - Click the "Business Questions" link, above for business/investment questions.
Q. Can I claim a tax deduction for losses in my traditional IRA account?
A. Perhaps. If the value of all your IRA's is less than your non-deductible contributions (basis), when you liquidate, you have a miscellaneous itemized deduction. This is not likely, however.
Q. If I purchased or inherited shares of stock at $20/share and the stock increased to a high of $50/share during my ownership, can I claim a loss if I sold it in 2008 for $25/share?
A. No, this is very much misunderstood. You would have a taxable gain of $5/share. This example assumes no reinvested dividends.
Q.Will the annual Gift Tax exclusion increase in 2017? Will I owe gift tax?
A.It remains $14,000. Very few folks ever owe gift tax. It is more likely you will need to submit a gift tax return, however.
Q. What isthe Earned Income Tax credit?
A.Sometimes referred to as "tax welfare", this credit provides a refundable payment to taxpayers with low earned income from wages and salary. Strict rules apply. As a result of past abuse, taxpayers will now be required to file a "due diligence" report when claiming the credit.
Q. Will I owe tax if I sell my home at a large gain?
A. Probably not. If you owned and lived in the home as your primary residence for any two of the past five years, you may have again of $250,000 (single) or $500,000 (married) without paying tax. If your gain exceeds these amounts, you will have taxable gain. Also, depreciation which was deducted or deductible on the part of your home used for business cannot be part of the excluded amount.
Q. Must my child's earnings be used to contribute to his or her Educational I.R.A.?
A. No, while your child must have earnings from a summer job or babysitting, for example, you can actually provide the funds contributed to the I.R.A. for your child. Interest, dividends & capital gains in these accounts can be withdrawn tax free to pay school expenses, including K - 12 education expenses such as private and parochial school costs.
Q.Will I receive a tax benefit if I give appreciated shares of stock to a charitable organization?
A.Yes, you will avoid the taxable gain that would be incurred if you sold the shares and donated the proceeds and can claim a charitable itemized deduction for the fair market value.
Q. When is a Gift Tax return required?
A. If you made a gift with value of more than $14,000 to any one individual in 2017, you are required to file a gift tax return by April 15, 2018. In most cases, no gift tax is due. Transferring your home to a child for less than appraised value constitutes a gift.
Q. What is new for businesses?
A. In2017 the Sect. 179 deduction limit is $500,000. Some lower limits apply for vehicles. The limit has been raised for future years and bonus depreciation will apply to equipment that is new to you - previously, you had to be the first user of the equipment.
Q. If I become ill and receive disability insurance benefits, must I pay tax on the benefits?
A. Maybe yes - maybe no! Generally, if your employer paid the insurance premiums or they were paid with pre-tax dollars, the benefits are taxable. If you paid the premiums, benefits would not be taxable. If your employer paid half the premiums, half the benefits will be taxable.
A great (federal tax) salary deferral opportunity for small businesses and the self- employed is available with very little administration - Click the link below.
SIMPLE Salary deferral (401-k like) plan annual amount SIMPLE Salary deferral (401-k like) plan annual amount