10 Things I Know About... ...The new federal tax law
David McLaren is the managing partner for Shrewsbury tax and forensic accounting firm McLaren & Associates CPAs, P.C.
10) Deduction of home mortgage interest. For home mortgages taken after Dec. 15, you can only deduct mortgage interest on the first $750,000 if married and home equity interest is no longer deductible unless to improve your property.
9) State and local taxes. With 2018 tax returns, deductions for state taxes paid, state tax withholding, real estate taxes, excise taxes and sales taxes all combined, are limited to $10,000 if married.
8) Alimony. For any divorce executed after Dec. 31, 2018, alimony is no longer a deduction and is tax free to the recipient.
7) Standard deductions and personal exemptions. The standard deduction has doubled to $24,000 if filing married, and all personal exemption deductions have been repealed.
6) Miscellaneous deductions. You can no longer deduct unreimbursed expenses from work, your accounting fee for preparing your returns, nor your investment fees, nor safe deposit box fees.
5) Alternative Minimum Taxes. Repealed for corporations but for individuals, the exemption rose quite a bit to now equal $109,400 for married couples.
4) C-Corporations. They no longer have graduated rates. It is a flat 21 percent.
3) Flow through entities (sole proprietorships, partnerships, S-Corporations, LLP's and LLC's) now get a deduction of 20 percent of their profit or 20 percent of the individual person's taxable income, whichever is less, unless your taxable income is more than $157,500 single/$315,000 married, then an additional limitation of 50 percent of the company wages is activated.
2) Professional services such as doctors, lawyers, accountants and a whole list of others get another limitation to No. 3 above. The deduction starts to phase out $315,000 married and is gone by $415,000 married for taxable income.
1) Yes, the law is much more complicated than it was before.
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