Today we continue our series highlighting some of the provisions in the recent Tax Cuts and Jobs Act. All provisions are effective 1/1/2018 unless otherwise stated. As always, if you should have any questions, please feel free to reach out to our office.
Additional Changes for Individuals
Child Tax Credit
The child tax credit is increased from $1,000 to $2,000. Begins to phase out for taxpayers whose AGI is over $400,000 (joint filers) and $200,000 in all other cases (these thresholds are not indexed for inflation). Provides a new nonrefundable credit of $500 for each dependent who is not a qualifying child. The refundable portion of the credit cannot exceed $1,400 for a qualifying child (adjusted for inflation after 2018).
529 Account Funding for Elementary and Secondary Education
529 plan distributions can be used for elementary or secondary public, private or religious school expenses, up to $10,000 per year per student. So, even though a student may be the beneficiary of multiple accounts, only $10,000 per year can be distributed tax-free for that student.
Qualified Moving Expenses
For tax years 2018 through 2025, qualified moving expense reimbursement will be included in the taxpayer’s income. For tax years 2018 through 2025, there will be no deduction for moving expenses except for members of the Armed Forces.
Tax Treatment of Alimony
Taxpayers will no longer be able to take a deduction for alimony payments, and alimony recipients will no longer include the payment in income. This applies to alimony payments made pursuant to a divorce or separation instrument executed after 12/31/2018 and to one executed before that date that is modified after that date if it is done so to have this statutory change apply to the modification.
Modification of Net Operating Loss Deduction
Limits the net operating loss (NOL) deduction to 80% of taxable income (determined without regard to the deduction), for loses arising in taxable years beginning after 12/31/2017. The limitation does not apply to a property and casualty insurance company. Repeals the two-year carryback and the special carryback provisions, but provides a two-year carryback in the case of certain losses incurred in the trade or business of farming. In addition, it provides a two-year carryback and 20-year carryforward for NOLs of a property and casualty insurance company. The provision does not increase NOL carryovers.
Repeal of Individual Mandate
Repeals the penalty tax on individuals who do not have health insurance.
Note: This does not repeal the employer mandate.