How The Tax Reform-Tax Cuts & Jobs Act Affect Individual Taxpayers

Withholding

We encourage several taxpayers to perform a paycheck checkup to check if they are having their employer withhold the right amount of tax for their situation, following the recent tax-law changes. It’s especially important for certain people, to check their withholding. Taxpayers who:

  • Belong to a two-income family.
  • Work two or more jobs or only work for part of the year.
  • Have children and claim credits such as the Child Tax Credit.
  • Have older dependents, including children age 17 or older.
  • Itemized deductions on their 2017 tax returns.
  • Earn high incomes and have more complex tax returns.
  • Received large tax refunds or had large tax bills for 2017.

Credits

For 2018, the maximum credit has increased and the income threshold at which the credit begins to phase out has increased. Each child must have a Social Security number before the due date of your 2018 return (including extensions) to be claimed as a qualifying child for the child tax credit or additional child tax credit.


 A new credit of up to $500 may be available for each dependent who does not qualify for the child tax credit. 

Deductions

Personal exemption deductions for yourself, your spouse, or your dependents have been eliminated beginning after December 31, 2017, and before January 1, 2026. 


For 2018, the standard deduction amount has nearly doubled for all filers, eliminating most miscellaneous itemized deductions items.

How The Tax Cuts & Jobs Act Affect Businesses

How Will It Affect Your Business?

Income (including Gains and Losses)

The law extended the holding period with respect to certain carried interests (i.e. applicable partnership interests) to three years.

Carried interests are ownership interests in a partnership that share in the partnership’s net profits. Carried interests often are issued to investment managers in connection with the investment manager’s services. These interests often result in the holder receiving capital gains which are taxed at a lower rate, rather than ordinary income.


The law, Section 1031 changed like-kind exchanges and now it applies only to exchanges of real property and not to exchanges of personal or intangible property. An exchange of real property held primarily for sale still does not qualify as a like-kind exchange.


Deductions and Depreciation

Many owners of sole proprietorship's, partnerships, trusts, and S corporations may be eligible for a new deduction – referred to as Qualified Business Income Deduction - allowing them to deduct up to 20 percent of their qualified business income.


Newly amended section 163(j) of the Internal Revenue Code imposes a limitation on deductions for business interest incurred by certain large businesses. For most large businesses, business interest expense is limited to any business interest income plus 30 percent of the business’ adjusted taxable income.


Credits

 

A general business credit employers may claim, based on wages paid to qualifying employees while they are on family and medical leave, subject to certain conditions.

Eligible employers who set up qualifying paid family leave programs or amend existing programs by Dec. 31, 2018 will be eligible to claim the employer credit for paid family and medical leave, retroactive to the beginning of the employer’s 2018 tax year, for qualifying leave already provided. Notice 2018-71 provides detailed guidance on the new credit in a question and answer format.



Tax reform for businesses

Tax reform for businesses