Ada Tax Professionals offers tax preparation, representation, bookeeping, and payroll services.
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More Specifics about the New Tax Law Updated: 01-19-2018
Dependent Children’s investment income which is taxed on their parent’s return (Kiddie tax) will no longer be taxed at the parent’s rate; instead the same rates used for estate/trust income tax will be in effect.
All Misc. deductions subject to the 2% limitation will be eliminated. This includes:
Investment expenses like management fees, tax prep, and legal fees.
Work related expenses such as uniforms, unreimbursed mileage, continuing education costs, job search expenses, tools, union dues, travel expense, and hobby expenses. We suggest employees ask their employers establish a reimbursement policy for job related expenses.
Taxpayers with net profitable businesses may qualify for a new deduction of 20% of the smaller of: 1) Qualified Business Income or 2) Taxable Income This will be a relatively straight forward deduction for single individuals with overall taxable income under $157,500 and couples with overall taxable income under $315,000. After that point employee wages and business property can play into the equation with most service trades eliminated after a further income limit.
The Tax Cuts and Jobs Act of 2017, as it’s officially named, was signed into law on December 22, 2017. It’s also known as the GOP Tax Plan and/or the Trump Tax Plan.
We are going from 6 income tax rates to 7. Starting with the 10% rate we now have in effect. The next 3 are dropping 3-4%. The income bracket ranges remain unchanged except are adjusted for inflation.
For those who have not been itemizing the new standard deduction makes up for the drop of the taxpayer and spouses’ exemption.
Except for a couple of provisions, the new federal law goes into effect for tax years beginning in 2018. The following are some of the major highlights:
The penalty for not having health insurance has been removed for 2019. Still in place for 2017 and 2018.
There will be fewer taxpayers itemizing beginning in 2018.
The standard deduction will be almost twice the previous amount.
Miscellaneous deductions subject to the 2% floor are eliminated. This includes employee business expense, investment expenses and tax preparation fees.
State and local income, sales and property tax are limited to $10,000 in total.
Only acquisition mortgage interest will be deductible including existing loans. No new home equity mortgage interest will be allowed.
The exemption deduction which was scheduled to be $4,150 per person in 2018 becomes $0. For those children age 17 or more, should you still care if they are your dependent? Possibly. Other issues are tied to the definition of dependent.
The child tax credit will jump from $1,000 to $2,000 which will compensate most for the loss of the dependent exemption. Note this is for children under the age of 17. Up to $1,400 is refundable.
The moving expense deduction has been eliminated. Additionally, if your employer paid moving costs, those benefits will be taxable.
The alternative minimum tax exemption is increased. Those of you who have been subject to it you are less likely to see it in 2018.
Alimony payments will no longer be deducted and alimony received will not be taxable.
Casualty losses due to theft, fire, etc will no longer be deductions unless they’re in a federally declared disaster area.
Estates are exempt from Federal Estate Tax unless their value exceeds 11 million. This is up from 5.49 million. Don't confuse this with Estate Income Tax which remains unchanged.
In light of the above items – what should you do about your withholding? The law leaves the withholding rules up to IRS including allowing IRS to make no changes to the withholding charts. We should be hearing in the next weeks. Any new W-4 could look radically different from the previous versions. We highly recommend keeping an eye on your withholding of income tax and note any differences from Dec 2017. Do this for several months. When you come in for your appointment have information in hand regarding your withholding (marital status, exemptions, additional w/h etc). This will be especially important if you have been using the exemptions claimed as a tool to cover extra income or compensate for the benefits of itemizing.
Business/ Rental Provisions
Although much of the news regarding the tax act pertains to the C Corporation drop in tax rate, our business clients (except for one) are either a pass through entity (partnership/LLC or S Corporation), a sole proprietorship or rental real estate owners. The entities themselves are not taxed, rather the owners are taxed on their share of the profit (or take their share of the loss.)
The new “pass through” deduction which could be as great as 20% of net income also applies to sole proprietors. Most business types qualify, but there are many limitations. This provision is complex. This office will be studying it carefully over the next weeks. If this interests you, watch for an update to this section.
NOL (Net Operating Loss) carrybacks have been eliminated. New NOLs and carryforwards will be limited to 80% of income. Carryforwards will no longer expire.
No more like-kind treatment for personal property, e.g. the trade-in of a business vehicle. The traded in vehicle will be treated as a sale and full value will be given to the new vehicle. Like-kind exchanges for real estate will remain.
UNICAP provisions are eased for small manufacturers.
The Domestic Production Activity Deduction will be eliminated.
We are making every effort to ensure this information is accurate, but this law will be open to interpretation for some months to come.
Friendly Professional Service
Ada Tax Professionals provides affordable, friendly and personal service since 1991, Ada Tax Professionals is open year-around for its individual and small business clients. The highly-trained staff, including Enrolled Agents qualified to represent clients at IRS audit, provides general bookkeeping, billing and payroll services, as well as current and prior-year tax preparation and consultation for individuals, partnerships, corporations, estates and trusts.
How are we different and what does this mean to you?
Same location since 1991: Proven stablility and accountability. All personnel are committed to our clients’ privacy concerns. We will be here to help you resolve problems with the IRS, Idaho State Tax Commission or even us.
High standards of personal integrity & professional training: Staff includes Enrolled Agents, who are able to represent clients at IRS audits and during collection proceedings. As members of Idaho Association of Tax Consultants, we are committed to complete extensive education/training each year.
Available year-around:Unlike some tax services set up in malls and grocery stores, ATP is available to our clients all year, not just during tax season.
Ada Tax Professionals
Friendly caring service: Ada Tax Professionals' staff personally answer the phones, promptly return missed calls, eagerly answer your questions and strive to explain, in layman terms, the tax laws and their ramifications.
Semi-annual newsletter:Ada Tax Professionals’ clients receive up-to-date information regarding current tax law affecting all aspects of their personal and business tax returns including starting or ending a business, real estate purchases or exchanges, divorce, retirement, etc..
Reasonable rates: Tax returns are prepared by highly trained tax professionals at affordable rates. Electronic filing and direct deposit are included in the base fee.
Not a bank: Ada Tax Professionals believes the clients should keep every dollar they can for themselves; therefore, we do not offer any special bank products or charge the associated fees that go with them. When electronic filing with direct deposit, federal refunds are generally in the bank in 21 days.
Getting Notices? We have experience dealing with IRS and Idaho State Tax Commisssion. As Enrolled Agents, we can represent you for audits, collections and most other tax matters that arise. Let us talk to them for you, and take some of the stress out your life.
Ada Tax Professionals is like a quilt. The colors may contrast, but that's part of what makes our quilt beautiful.
Gribskov Inc. dba Ada Tax Professionals, Copyright 2018, All Rights Reserved 9140 Ustick Rd, Boise, Idaho 83704 208-377-4303