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Investment Letter

2017 Tax Cuts and Jobs Act

 

New Marginal Tax Bracket

Married: If taxable income is

The tax is

Not more than $19,050

10% of taxable income

Over $19,050 but not more than $77,400

$1,905.00 + 12% of excess over $19,050

Over $77,400 but not more than $165,000

$8,907.00 + 22% of excess over $77,400

Over $165,000 but not more than $315,000

$28,179.00 + 24% of excess over $165,000

Over $315,000 but not more than $400,000

$64,179.00 + 32% of excess over $315,000

Over $400,000 but not more than $600,000

$91,379.00 + 35% of excess over $400,000

Over $600,000

$161,379.00 + 37% of excess over $600,000

 

 

Single: If taxable income is

The tax is

Not more than $9,525

10% of taxable income

Over $9,525 but not more than $38,700

$952.50 + 12% of excess over $9,525

Over $38,700 but not more than $82,500

$4,453.50 + 22% of excess over $38,700

Over $82,500 but not more than $157,500

$14,089.50 + 24% of excess over $82,500

Over $157,500 but not more than $200,000

$32,089.50 + 32% of excess over $157,500

Over $200,000 but not more than $500,000

$45,689.50 + 35% of excess over $200,000

Over $500,000

$150,689.50 + 37% of excess over $500,000

 

 

Head of Household: If taxable income is

The tax is

Not more than $13,600

10% of taxable income

Over $13,600 but not more than $51,800

$1,360.00 +12% of excess over $13,600

Over $51,800 but not more than $82,500

$5,944.00 + 22% of excess over $51,800

Over $82,500 but not more than $157,500

$12,698.00 + 24% of excess over $82,500

Over $157,500 but not more than $200,000

$30,698.00 + 32% of excess over $157,500

Over $200,000 but not more than $500,000

$44,298.00 + 35% of excess over $200,000

Over $500,000

$149,298.00 + 37% of excess over $500,000

 

 


 

Standard Deduction

Filing Status

Current

2018-2025

Single

$6,500

$12,000

Married filing separate

$6,500

$12,000

Head of household

$9,550

$18,000

Married filing jointly

$13,000

$24,000

 

Capital Gain Tax Rates

Long-Term Capital Gain/Qualified Dividend Income

 
 

Married

Single

 

0%

$0 - $77,200

$0 - $38,600

 

15%

$77,200 - $479,001

$38,600 - $425,800

 

20%

$479,000 +

$425,800 +

 

 

Itemized Deductions

 

Unchanged Deductions for 2018

 

Business property tax. Taxes paid on rental property remain fully deductible on schedule E.

 
 

 

 

Itemized Deductions

 

 

 

Eliminated Deductions for 2018

 

 

 

Existing or new home equity loans

 

 

 

Job related moves (exception military)

 

 

 

Employee business expenses

 

 

 

Investment advisory/brokerage fees

 

 

 

Hobby expenses

 

 

 

Tax return preparation fees

 

 

 

Theft losses

 

 

 

Alimony for post 2018 divorcee decrees

 

 

 

Personal casualty losses (exception presidential declared disaster areas)

 

 

 

Safe deposit box rental

 

 

 

Union dues

 

 

 

Phaseout for Itemized deductions

 

 

Itemized Deductions

 

Modified Deductions for 2018

 

Medical Expenses. AGI threshold lowered from 10% to 7.5% for 2017 and 2018 ONLY.  AGI floor returns to 10% after 2018.

 

Home loan interest (primary and secondary).  Interest deductibility limited to debt up to $750,000.  Applies to mortgages incurred after December 14, 2017. Older mortgages - $1 million debt limit.

 
 

State and local taxes. Deduction capped at $10,000 for any combination of residential property, income, or sales tax.

 

Charitable Contributions. Deduction preserved with an adjustment that increases the AGI limit for cash donations to qualified charities from 50% to 60%.  In addition, the deduction for 80% of the amount paid to a college for the right to purchase athletic tickets is repealed.

 
 
 

Gambling losses. Deduction for gambling losses capped to the extent of gambling winnings. Any expenses connected to gambling in excess of winnings are no longer deductible.

 
 
     

 

 

Kiddie Tax

Ordinary Taxable Income

Ordinary Income Tax Rate

$0 - $2,550

10%

$2,550 - $9,150

24%

$9,150 - $12,500

35%

$12,500+

37%

Capital Gain Income

Capital Gain Tax Rate

$0 - $2,600

0%

$2,550 - $12,700

15%

$12,700+

20%

  

 

 

Additional Tax Reform Changes

Obamacare individual mandate repealed after 2018.

Individual Alternative Minimum Tax (AMT) adjusted with higher exemptions and phaseout zones.

Child tax credit doubled to $2,000 for each dependent under age 17, and a $500 credit for each dependent who is not a qualifying child.

Lifetime estate tax exclusion increased to $11.2 million per person or $22.4 million per couple.

Roth IRA conversions (recharacterization) eliminated.

529 college saving plans now allow up to $10,000 per student to pay expenses for elementary and secondary education at a public, private, or religious school. Qualified expenses are expanded to include certain home schooling expenses.

Business tax rates are decreasing from a top rate of 35% to a 21% flat rate for "C corporations". The reduction in business taxes are permanent.

Corporate AMT eliminated.

Individual owners of pass-throughs will get a new 20% deduction of qualified business income. The new rule covers sole proprietors, S corporation owners, partnerships, LLCs.

Excess business losses on individual returns are capped at $500,000 for couples and $250,000 for all other tax payers.

 

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