Longtime Fallon account Joe Lane, who specializes in taxes, spoke to Wednesday’s monthly Churchill Economic Development Authority’s Business Council about the new tax laws that went into effect for 2018.
First and foremost, Lane said the 2018 standard deduction and personal exemption has changed to $12,000 for single filers, $24,000 for married couples filing jointly and $18,000 for the head of the household. He said the next tax plan kept seven brackets, but the deduction percentage has changed. Lane said the highest percentage, 37 percent, affects taxable income of $500,000 and higher for single and heads of household and $600,000 for married filing jointly.
The 24 percent bracket, where most people will file, begins at $82,500 for singles and head of households and $165,000. While homeowners may still take their mortgage interest, Lane said home equity lines are no longer deductible unless grandfathered in. Other items no longer deductible include miscellaneous employee business expenses and moving expenses. Lane said this would not affect military moves because the service member is reimbursed by the government.
“One of the big things for business is the corporate rates went down from 35 percent to 21 percent,” Lane said.
Another deduction that was eliminated included fringe benefits. He said businesses renting skyboxes, buying tickets for clients or meals for entertainment, for example, are no longer deductible. Meals can still be deductible if the person is traveling.
Lane explained the child tax credit has increased to $2,000 for each qualifying child. Adjusted gross income is capped for married taxpayers at $400,000 and $200,000 for others.
“Some things haven’t changed,” he said. “Taxes on scholarships that exceed expenses such as tuition and books can be taxed.”
“But that hasn’t changed,” Lane said when asked.
Lane said the people who donate much money to charities will be hurt by caps.
A business owner asked if the new tax deductions will hurt people.
“I think the majority of people it will help,” Lane said. “Will it change people’s lifestyles? Probably not.”
Lane also said home office deductions remain, and deductions for a self-proprietor should come down.
“The Affordable Care Act penalty for not having it is still in effect for 2018 but goes away in 2019,” Lane said.
Lane said medical and dental expenses is 7.5 percent for everyone, and taxpayers can only deduct after they figure out their adjusted gross income.
Deductions for state and local sales, income and property taxes normally deducted on a Schedule A are still part of the tax code. Home mortgage interest deduction has been modified. Lane said taxpayers may only deduct interest on acquisition indebtedness — mortgage used to buy, build or improve your home — up to $750,000 or $375,000 for married taxpayers filing separately. For mortgages taken out before Dec. 15, 2017, the limit is $1,000,000 or $500,000 for married taxpayers filing separately.
According to Lane, many provisions of the tax code for individuals and couples sunset in 2025. Corporations will not be affected.
Lane said if taxpayers have problems with their 2018 taxes, they should consult with a tax preparer or accountant who can help them navigate through the changes.
The Internal Revenue Service has a website devoted to tax changes for 2018. Go to https://www.irs.gov/newsroom/tax-reform.