Tax News
Due date to file 2017 taxes is April 17th, 2018.
Highlights of Tax cuts and Jobs Act (TCJA) – Trump’s New Tax Law
TCJA made multiple changes to tax law which is effective from 2018 tax year (earnings made in 2018 and beyond). It benefits some taxpayers and hurts some. For 2017 tax earrings, still old tax law would apply (meaning tax returns filed this year for 2017).
So far, existing tax laws were mostly same for all taxpayers whether they are citizens or immigrants. That has been changing slowly. It started couple of years ago, when Obama’s PATH act was signed and now it has extensively modified under Trump’s new TCJA.
Below are some of the changes that I would like to highlight for your understanding:
Child Tax Credit (CTC): As of 2017 tax year, each taxpayer gets a $1000 CTC per child (under 17 years) whether they are citizens or immigrants with a SSN or ITIN. Under TCJA, this credit has been doubled and will only eligible for taxpayers whose children has a Social Security Number (SSN). Sorry, if you have an ITIN for your kid, this credit is no longer available from 2018 tax year.
Kids with SSN: $2000 credit per child.
Kids with ITIN: $0 credit per child.
Good News: Under new law, the phase out amounts have been increased from $110,000 to $400,000. Taxpayers who make up to $400,000 (400,000 for married filing jointly and 200,000 for others) will receive 100% child tax credit. It will start phasing out after $400,000 of income.
Family Credit: This is a brand new credit, all eligible dependents will receive a $500 credit per person. This is available for ITIN holders as well. Kids who do not qualify for child tax credit will be able to get this $500 credit. Taxpayer and Spouse are not eligible for this credit.
Tax Brackets: Tax rates and brackets has been reduced/adjusted. This should help lot of taxpayers.
Good News: Standard deduction: This deduction changed to $24,000 for married filing jointly (MFJ) and to $12,000 for those filing single.
Personal Exemption has been removed in the new tax law: TCJA has removed personal exemption. It is currently $4050 per person (family with 2 kids is receiving $16,200 ($4050 x 4) as a deduction). Under the new law this has been eliminated which is a big deduction.
Itemized deductions: TCJA imposed limitations on some deductions used in itemized deductions. Most of the taxpayers will not be able to itemize from 2018 tax year. If you are wondering whether you will qualify or not, look at your mortgage interest statement-1098, if you are paying at least $14,000 or over as mortgage interest per year then you may be eligible to itemize if total itemized deductions exceed your standard deduction.
Miscellaneous deductions – Misc. deductions with 2% AGI limitation has been eliminated under the TCJA. That means you will not be able to deduct “Unreimbursed business expenses” such as union dues or business mileage.
Moving Expenses: Under TCJA you cannot deduct any of the moving expenses anymore except for Military personnel. If your employer pays for the moving, they need to include that amount on your W2 and you will be paying taxes on those reimbursements.
American Opportunity Credit (AOTC): This education credit of $2500 for under grad students has been removed for ITIN holders only in the new tax law from 2018. Those students with SSN will continue to receive this credit.
Alimony: Alimony payments are not deductible anymore for the new divorce orders starting from 2019.
Good News: 529 Education Plans: You may take the money out of 529 plan for K-12 grades as well with a limit of $10,000 per year per student.
Filing Threshold: You do not need to file a tax return if your income is below filing threshold. Standard deduction amounts are filing thresholds for most of the tax payers.
Dependents who are working part time: Teenagers who start working part time after school may not require to pay taxes or file the returns up to $12,000 of income from 2018. If the dependents estimated income is going to be below $12,000 then suggest them to submit a new W4 form to their employer with “Exempt” on line # 7. The employer will not withhold any income taxes from their paychecks.
Disclaimer: IRS is still working on providing guidelines for the new tax law. Until then we may not be able to provide correct impact on some of the rules. The above information is provided for the benefit of our clients and will advise when IRS publishes provide guidelines from time to time. This information has been collected and compiled from multiple sources.
TCJA made multiple changes to tax law which is effective from 2018 tax year (earnings made in 2018 and beyond). It benefits some taxpayers and hurts some. For 2017 tax earrings, still old tax law would apply (meaning tax returns filed this year for 2017).
So far, existing tax laws were mostly same for all taxpayers whether they are citizens or immigrants. That has been changing slowly. It started couple of years ago, when Obama’s PATH act was signed and now it has extensively modified under Trump’s new TCJA.
Below are some of the changes that I would like to highlight for your understanding:
Child Tax Credit (CTC): As of 2017 tax year, each taxpayer gets a $1000 CTC per child (under 17 years) whether they are citizens or immigrants with a SSN or ITIN. Under TCJA, this credit has been doubled and will only eligible for taxpayers whose children has a Social Security Number (SSN). Sorry, if you have an ITIN for your kid, this credit is no longer available from 2018 tax year.
Kids with SSN: $2000 credit per child.
Kids with ITIN: $0 credit per child.
Good News: Under new law, the phase out amounts have been increased from $110,000 to $400,000. Taxpayers who make up to $400,000 (400,000 for married filing jointly and 200,000 for others) will receive 100% child tax credit. It will start phasing out after $400,000 of income.
Family Credit: This is a brand new credit, all eligible dependents will receive a $500 credit per person. This is available for ITIN holders as well. Kids who do not qualify for child tax credit will be able to get this $500 credit. Taxpayer and Spouse are not eligible for this credit.
Tax Brackets: Tax rates and brackets has been reduced/adjusted. This should help lot of taxpayers.
Good News: Standard deduction: This deduction changed to $24,000 for married filing jointly (MFJ) and to $12,000 for those filing single.
Personal Exemption has been removed in the new tax law: TCJA has removed personal exemption. It is currently $4050 per person (family with 2 kids is receiving $16,200 ($4050 x 4) as a deduction). Under the new law this has been eliminated which is a big deduction.
Itemized deductions: TCJA imposed limitations on some deductions used in itemized deductions. Most of the taxpayers will not be able to itemize from 2018 tax year. If you are wondering whether you will qualify or not, look at your mortgage interest statement-1098, if you are paying at least $14,000 or over as mortgage interest per year then you may be eligible to itemize if total itemized deductions exceed your standard deduction.
Miscellaneous deductions – Misc. deductions with 2% AGI limitation has been eliminated under the TCJA. That means you will not be able to deduct “Unreimbursed business expenses” such as union dues or business mileage.
Moving Expenses: Under TCJA you cannot deduct any of the moving expenses anymore except for Military personnel. If your employer pays for the moving, they need to include that amount on your W2 and you will be paying taxes on those reimbursements.
American Opportunity Credit (AOTC): This education credit of $2500 for under grad students has been removed for ITIN holders only in the new tax law from 2018. Those students with SSN will continue to receive this credit.
Alimony: Alimony payments are not deductible anymore for the new divorce orders starting from 2019.
Good News: 529 Education Plans: You may take the money out of 529 plan for K-12 grades as well with a limit of $10,000 per year per student.
Filing Threshold: You do not need to file a tax return if your income is below filing threshold. Standard deduction amounts are filing thresholds for most of the tax payers.
Dependents who are working part time: Teenagers who start working part time after school may not require to pay taxes or file the returns up to $12,000 of income from 2018. If the dependents estimated income is going to be below $12,000 then suggest them to submit a new W4 form to their employer with “Exempt” on line # 7. The employer will not withhold any income taxes from their paychecks.
Disclaimer: IRS is still working on providing guidelines for the new tax law. Until then we may not be able to provide correct impact on some of the rules. The above information is provided for the benefit of our clients and will advise when IRS publishes provide guidelines from time to time. This information has been collected and compiled from multiple sources.