Tax Cuts and Jobs Act: What Does it Mean for Me?

By Ryan Duffy

With sweeping tax reform left under the tree this Christmas, many are scrambling to determine what exactly their tax world looks like for 2018. First and foremost, there is a tremendous amount of uncertainty with respect to the new legislation, and a corresponding lack of jurisprudence to analyze the same. That being said, let’s jump into some of the highlights…

For individuals, many that have previously itemized (rather than take the standard deduction) will be migrating back to the standard deduction. The 2018 standard deduction has essentially doubled ($12,000 for Single, $24,000 for Married Filing Jointly). This may simplify tax bookkeeping for many, but taxpayers should not stop collecting receipts and tracking mileage just yet. The rules with respect to various itemized genres, including but not limited to charitable giving and the SALT (state and local tax) deductions have changed. Itemizing will still be the better option for some, and as such, a careful analysis of the best option should be undertaken before switching course. Individuals will also potentially face a lower tax bill on account of the more favorable tax brackets. The foregoing are but the tip of the iceberg for the changing individual tax landscape.

For businesses, there is much uncertainty regarding the new tax structure. Pass through businesses (Partnerships, S-Corps, LLCs, etc.) now may pass a 20% deduction of Qualifying Business Income (QBI) to their owners. QBI will undoubtedly be a hot topic as the new tax world evolves, as will the limitations that are placed on the 20% deduction, such as the W-2 wage income and service entities (doctors, lawyers, etc.) limitations. For C Corporations, the tax rate has dropped to 21%, down from the maximum tax rate of 35%. Businesses also will be affected by more favorable depreciation rules, allowing for immediate expensing of most asset purchases. Once more, this is a small sampling of a mass amount of changes, and there remains a great deal of uncertainty as to application of the new rules.

The foreseeable future will undoubtedly be an evolving tax landscape. Great uncertainty, and thereby great opportunity and risk, will be the story of the day for taxpayers. If you haven’t cozied up to your CPA or tax attorney, there is no better time than the present. Best of luck!

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