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Tax Guide 

IRS Tax Law Changes

Americans Abroad

Capital Gains, Interest and Dividends

Deductions

Dependents

Education Credits, Scholarships

Foreign Bank Reporting

Foreign Nationals

Social Security, Medicare, Self Employment Tax

State Taxes

Tax Deadlines, Extensions, Late Payments, Estimated Tax

Tax Resident, Nonresident, Dual Status

Other Topics


Information on this website is not intended to be written advice concerning tax matters, but is for general information purposes only and based on tax laws that are subject to change.  Applicability of the information to specific situations should be determined through consultation.

IRS Tax Law Changes


 

2018 Tax Changes

 

Major changes for tax year 2018.  Please also refer to IRS Publication 5307.  More taxpayers will be better off claiming the standard deduction rather than itemizing deductions.  Note:  Nonresident aliens filing Form 1040NR are generally required to claim itemized deductions. 


Tax law for 2017 versus 2018 tax returns

 

2017 Tax Return

2018 Tax Return

Standard Deduction

Standard Deduction

Single  $6,350

Married Filing Jointly $12,700

Married Filing Separately $6,350

Head of Household $9,350

(Note:  The standard deduction is higher for people born before January 2, 1953).

Single  $12,000

Married Filing Jointly $24,000

Married Filing Separately $12,000

Head of Household $18,000

Deduction for Personal Exemption

A deduction reduces your income, not your tax.

Taxpayer, spouse and dependent can claim $4,050 each, subject to the following phase-outs in adjusted gross income:
Single (beginning at $261,500, phased out completely at $384,000); Married filing jointly (beginning at $313,800, phased out completely at $436,300).
 

 

Deduction for Personal Exemption

Suspended

 

2017 Itemized Deductions

2018 Itemized Deductions

Home Acquisition Debt (primary plus second home):

Deduct interest paid on mortgages up to $1,000,000.  However, if the loan exceeds $1 million, the next $100,000 of that debt can be treated as home equity debt.  In other words, the $1,000,000 limit is really $1,100,000.

 

Home Acquisition Debt (primary plus second home):

Loans secured before 12/15/17:

Deduct interest paid on mortgages up to $1,000,000

Loans secured after 12/15/17:

Deduct interest paid on mortgage debt up to $750,000

 

Home Equity Debt:

Deduct interest paid on loans up to $100,000.

The loan can have been used to pay for anything.

 

Home Equity Debt:

You can only deduct interest paid on home equity debt if the debt was used to buy, build or substantially improve the taxpayer's home that secures the loan.  The total of the home equity debt plus home acquisition debt cannot exceed $750,000.  You cannot deduct interest from home equity debt for a second home if the loan is secured by the main home and not the second home.

Property Tax Deduction:

Unlimited.  Deduct real estate taxes paid (state, local or foreign) on real property, including vacant land.

 

Property Tax Deduction:

No deduction for foreign property taxes. 

Your deduction of state and local income, sales, and property taxes is limited to a combined, total deduction of $10,000 ($5,000 if married filing separately).

State and Local Taxes:

Deduct state and local income taxes paid during 2017.    

 

State and Local Taxes

Your deduction of state and local income, sales, and property taxes is limited to a combined, total deduction of $10,000 ($5,000 if married filing separately).

Medical Expenses.

Can only claim the portion of the out-of –pocket medical expenses that exceed 7.5% of your adjusted gross income.

 

Medical Expenses.

No change.  After 2018, you can only claim the portion of the out-of –pocket medical expenses that exceed 10% of your adjusted gross income.

Charitable Donations:

Cash and non-cash gifts to qualified charities are deductible.

 

Charitable Donations:

No change. 

Job Expenses and Miscellaneous Itemized Deductions Subject to 2% of AGI Floor

Can claim the portion that of the total expenses that exceed 2% of your adjusted gross income.  Includes unreimbursed employee business expenses, investment advisory fees, safe deposit box fees, tax prep fees, and more.

 

Job Expenses and Miscellaneous Itemized Deductions Subject to 2% of AGI Floor

Eliminated.

 

Casualty and Theft Losses

For victims of fire, flood, burglary or similar event.  You can only claim the portion that exceeds 10% of your adjusted gross income.

.

 

Casualty and Theft Losses

Same rules but you can only claim the losses if the event was declared a disaster by the president.  The loss may be claimed in addition to the standard deduction.

 

Itemized Deduction Limitation

Your itemized deductions may be limited

 

Itemized Deduction Limitation

The overall limit on itemized deductions is suspended for tax years 2018-2025.

 

2017 Tax Return 2018 Tax Return

Child Tax Credit

A credit reduces your tax, not your income.

$1,000, subject to phase-out beginning with modified adjusted gross income of:

Single ($75,000), married joint ($110,000).   For each $1,000 of income above the threshold, your available child tax credit is reduced by $50.

The child can have a SSN or ITIN.

 

Child Tax Credit

A credit reduces your tax, not your income.

$2,000, subject to phase-out beginning with in modified adjusted gross income of:

Single ($200,000), married filing jointly ($400,000).

 

The child must have a SSN.

 

 

Credit for Other Dependents

There is a new $500 nonrefundable tax credit for each eligible dependent who can't be claimed for the child tax credit.

Moving Expenses

You can claim moving expenses as long as the new workplace is at least 50 miles farther from the old home than the old job location was from the old home.

 

Moving Expenses

Eliminated (with some exceptions for members of the armed services).

 

529 Plans

You can withdraw the money that you contributed tax-free to pay for higher education expenses (i.e., college/university).

 

529 Plans

In addition to paying for higher education, you can also withdraw up to $10,000 each year, per child, to pay for private or religious school, or if you home-school.

 

Pass-Through Business Income

Pass through ordinary income is taxed at normal individual tax rates.

 

Pass-Through Business Income

You may be able to deduct up to 20% of your qualified business income from your qualified trade or business, plus 20% of your qualified REIT dividends and qualified PTP income.

There are limits, including a phaseout for the deduction.

 

2017 Individual Income Tax Brackets
 

Single
 

·         10%:  $0 to $9,325

·         15%:  $9,325 to $37,950

·         25%:  $37,951 to $91,900

·         28%:  $91,901 to $191,650

·         33%:  $191,651 to $416,700

·         35%:  $416,701 to $418,400

·         39.6%:  over $418,400


Married

·         10%:  $0 to $18,650

·         15%:  $18,651 to $75,900

·         25%:  $75,901 to $153,100

·         28%:  $153,101 to $233,350

·         33%:  $233,351 to $416,700

·         35%:  $416,701 to $470,700

·         39.6%:  over $470,700

 

2018 Individual Income Tax Brackets
 

Single
 

·         10%:  $0 to $9,525

·         12%:  $9,526 to $38,700

·         22%:  $38,701 to $82,500

·         24%:  $82,501 to $157,500

·         32%:  $157,501 to 200,000

·         35%:  $200,001 to $500,000

·         37%:  over $500,000
 

Married

·         10%:  $0 to $19,050

·         12%:  $19,051 to $77,400

·         22%:  $77,401 to $165,000

·         24%:  $165,001 to $315,000

·         32%:  $315,001 to $400,000

·         35%:  $400,001 to $600,000

    37%:  over $600,000

 

AMT Exemption

Single ($54,300), married joint ($84,500)

Alternative Minimum Tax Exemption Phaseout Threshold

Single ($120,700), married joint ($160,900)

 

AMT Exemption

Single ($70,300), married joint ($109,400)

Alternative Minimum Tax Exemption Phaseout Threshold

Single ($500,000); married joint ($1,000,000)

 

Individual Health Insurance Mandate

Fee for not having insurance is the higher of:  (1) 2.5% of household income (to maximum of total yearly premium of national average of Bronze plan) or (2) $695 per adult, $347.5 per child under 18 (to maximum of $2,085).

 

Individual Health Insurance Mandate

Fee is similar to 2017, but the mandate is eliminated in 2019.

 

2017 Kiddie Tax
Net unearned income of a child (for 2017, unearned income over $2,100) is taxed at the parents’ tax rates if the parents’ tax rates are higher than the tax rates of the child. The remainder of a child’s taxable income (i.e., earned income, plus unearned income up to $2,100 (for 2017), less the child’s standard deduction) is taxed at the child’s rates, regardless of whether the kiddie tax applies to the child.  In general, a child is eligible to use the preferential tax rates for qualified dividends and capital gains.
2018 Kiddie Tax
Taxable income attributable to net unearned income is taxed according to the brackets applicable to trusts and estates.

Taxable income attributable to earned income is taxed according to an unmarried taxpayers’ brackets and rates.

A child is eligible to use the preferential tax rates for qualified dividends and long term capital gains at the brackets applicable to trusts and estates.

 

 

Section 965 deferred foreign income.

If you own (directly or indirectly) certain foreign corporations, you may have to include on your return certain deferred foreign income. You may pay the entire amount of tax due with respect to this deferred foreign income this year or elect to make payment in eight installments or, in the case of certain stock owned through an S corporation, elect to defer payment until the occurrence of a triggering event. See the instructions for Line 11a; Schedule 1, line 21; Schedule 5, line 74; Form 965; Form 965-A; and Pub. 5292 for more information.

 

 

Global intangible low-taxed income (GILTI) under section 951A.

If you are a U.S. shareholder of a controlled foreign corporation (owning at least 10 percent of the value or voting rights in one or more CFCs), you must include your GILTI in your income. If you own an interest in a domestic pass-through entity that is a U.S. shareholder of a controlled foreign corporation, you may have a GILTI inclusion related to that interest, even if you are not a U.S. shareholder of the controlled foreign corporation. See IRS Form 8992 and its instructions for the latest information regarding GILTI and domestic pass-through entities.

 

2015, 2016 and 2017 Tax Changes

No major income tax changes for 2015, 2016 and 2017.   

2014 Tax Changes

 

The Affordable Care Act requires that U.S. tax residents (with some exceptions) have health insurance starting in 2014. If you are not insured, you may have to pay a health care tax penalty on your 2014 tax return (filed in 2015). U.S. expatriates who claim a foreign earned income exclusion under the bona fide resident test or the physical presence test are exempt from this requirement.   The mandate for this ends as of tax year 2019.

2013 Tax Changes