Crowe has released “Tax Planning: 2018 Year-End Guide” to help taxpayers and tax professionals with their year-end tax planning in the wake of the Tax Cuts and Jobs Act.
The TJCA made some small reductions to income tax rates for most individual tax brackets, while significantly decreasing the income tax rate for corporations. But to offset those rate reductions, some of the most popular tax breaks were limited or eliminated.
Much of the tax relief for individuals provided is only temporary. “Unless Congress acts to make the cuts permanent, timing your income and expenses is critical this year and during the next few years,” said Gary Fox, managing partner of Crowe tax services, in a statement last week. “Working closely with a tax adviser can help you identify which changes affect you and the best strategies for maximizing the new law’s benefits, while minimizing negative tax ramifications.”
On Monday, the IRS also released a publication to help taxpayers learn more about how the new tax law affects their income taxes. Publication 5307, Tax Reform Basics for Individuals and Families, is available on IRS.gov/getready.
The TJCA substantially increased exemptions for the alternative minimum tax, so fewer tax payers will need to pay the AMT next year. There are now fewer differences between what’s deductible for AMT purposes and regular tax purposes, also reducing AMT risk. Fox noted that the AMT will still remain a threat for some higher-income taxpayers.
For tax years from 2018 through 2025, the TJCA provided a new deduction for owners of pass-through business entities, such as sole proprietorships, partnerships, S corporations and limited liability companies treated as sole proprietorships or partnerships for tax purposes. The deduction generally equals 20 percent of qualified business income (QBI), subject to limitations that begin to apply if taxable income exceeds $315,000 for married taxpayers or $157,500 for single taxpayers. This QBI deduction isn’t allowed in calculating the owner’s adjusted gross income, but it reduces taxable income.
The Crowe tax-planning guide also includes insights on some other topics:
• Year-to-date review: AMT triggers, avoiding or decreasing AMT, timing income and expenses, employment and self-employment taxes, additional 0.9 percent Medicare tax, owner-employees and estimated payments, and withholding;
• Executive compensation: restricted stock, incentive stock options, nonqualified stock options and nonqualified deferred compensation plans;
• Investing: 3.8 percent net investment income tax, capital gains tax and timing, wash sale rules, loss carryovers, zero percent capital gains rate, mutual funds, small business stock, passive activities, income investments and investment interest expense;
• Real estate: home-related deductions, home office deduction, home rental rules, home sales, real estate activity rule, depreciation-related tax breaks and tax-deferral strategies;
• Business ownership: taxes on business income, business loss deduction, retirement savings, exit planning and sale or acquisition;
• Charitable giving: cash donations, stock donations, individual retirement account donations, giving gifts over time, charitable remainder trusts and qualified charities;
• Family and education: the “kiddie tax,” IRAs for teens, 529 plans, education savings accounts, ABLE accounts and the American opportunity credit;
• Retirement: retirement plan contributions, Roth IRA conversions, early withdrawals, dseparting a job and required minimum distributions;
• Estate planning: estate tax, gift tax, generation-skipping tax, state taxes, exemption portability, tax-smart giving and trusts.