To our Clients:
The IRS has announced that the start date for 2019 tax filings will commence on January 27th, 2020. This will be the second year that the TCJA (Tax Cuts and Jobs Act) Tax Reform is in effect. Below we have highlighted some important reminders as to what the law has changed with their inflation adjustments for 2020:
• Individual tax return deadline will be falling on Wednesday April 15th, 2020.
• C-Corporations tax return filing will be due on April 15th 2020.
• Partnership and S-Corporation tax return filing will be due on March 16th, 2020.
• Report of Foreign Bank and Financial Accounts (FBAR) will be due April 15th, 2020.
Highlights of the Tax Cuts and Jobs Act
- Income tax rates ranging from (depending on the bracket) to 10%, 12%, 22%, 24%, 32%, 35% and 37% — through 2025
- The standard deduction increases to $ 12,400 for individuals, and $ 24,800 for married couples
- Elimination of personal exemptions — through 2025
- Doubling of the child tax credit to $2,000
- Elimination of the individual mandate under the Affordable Care Act requiring taxpayers not covered by a qualifying health plan to pay a penalty.
- The state of California will be charging a penalty if a taxpayer does not have health insurance.
- Reduction of the adjusted gross income (AGI) threshold for the medical expense deduction to 7.5% for regular and AMT purposes — for 2017 and 2018
- $10,000 limit on the deduction for state and local taxes (on a combined basis for property and income taxes; $5,000 for separate filers).
- Reduction of the mortgage debt limit for the home mortgage interest deduction to $750,000 ($375,000 for separate filers).
- Elimination of the deduction for interest on home equity debt.
- Elimination of the personal casualty and theft loss deduction (with an exception for federally declared disasters).
- Elimination of miscellaneous itemized deductions subject to the 2% floor (such as certain investment expenses, professional fees and unreimbursed employee business expenses).
- Elimination of the AGI-based reduction of certain itemized deductions.
- Elimination of the moving expense deduction (with an exception for members of the military in certain circumstances).
- Expansion of tax-free Section 529 plan distributions to include those used to pay qualifying elementary and secondary school expenses, up to $10,000 per student per tax year
- AMT exemption increase, to $113,400 for joint filers, $71,700 for singles and heads of households.
- Doubling of the gift and estate tax exemptions, to $10 million (expected to be $11.2 million for 2018 with inflation indexing).
- 0.9 Percent Mericare tax on wages above $ 200,000 for individuals ($ 250,000 joint filers) remains in effect for 2020
- Medicare tax on 3.8 percent on investment (unearned) income for single taxpayers with modified adjsuted gross income more than $ 200,000 ( $ 250,00 Joint filers).
- Foreign Earned Income Exclusion amount is $ 107,600.
- Contribution Limits - 401k/ 403b/ and most 457 plans increase to $19,500
- SIMPLE Plans increase to $ 13,500 / maximum compensation used to determine contribution increases to $ 285,000
- Corporate tax rates ranging from 15% to 35% with a flat C corporate rate of 21%
- Standard Mileage rate has increased to 57.5 cents per mile down a half percent from 2019
- Section 179 expense deduction increases to a maximum deduction of $ 1,040,000 of the first $ 2,590,000.
- Bonus Depreciation- Business are allowed to immediatley deduct 100% of the cost of eligible property placed in service after Sept 2017.
- Repeal of the 20% corporate AMT
- 20% qualified business income deduction for owners of flow-through entities (such as partnerships, limited liability companies and S corporations) and sole proprietorships — through 2025
- Disallowance of deductions for net interest expense in excess of 30% of the business’s adjusted taxable income (exceptions apply)
- Tax credit for employer-paid family and medical leave — through 2019
- Limitations on deductions for employee fringe benefits, such as entertainment and, in certain circumstances, meals and transportation
If you have any additional questions please contact our office.
Carlos A. Ausejo, E.A.