Taxing Matters

Now that the ink has dried on the 2017 Tax and Jobs Act, we describe the provisions most likely to affect you.

➢INCOME TAX BRACKETS AND THE AMT

• Income tax brackets have changed and if you were subject to the top rate of 39.6% (for those earning in excess of $500,000 if single and $600,000 if married filing jointly) you will see it decline to 37%.
• If you are subject to the alternative minimum tax, you will see higher exemptions ($70,300 for single filers and $109,400 for joint filers). The exemptions will begin to phase out for single filers at $500,000 of taxable income and joint filers at $1 million of taxable income.

➢ DEDUCTIONS

• State & local property taxes may be deducted if the total of these tax categories does not exceed $10,000. Even if the total exceeds $10,000, you may no longer deduct the excess.
• You may no longer deduct interest expense on a home equity loan, regardless of the loan’s value.  Your ability to deduct mortgage interest is now a bit more limited. You may deduct interest on mortgages whose origination amount is $750,000 or less if finalized after December 15, 2017.
• Loans finalized prior to that date are grandfathered and subject to the prior limit of $1,000,000 in origination amount for mortgage interest deduction.
• You may deduct cash charitable contributions of up to 60% of your adjusted gross income (up from 50% before).
• You may no longer deduct miscellaneous items, the most common of which are tax planning and preparation fees, investment management fees, and various unreimbursed employee business expenses, including home office expenses.

➢ ESTATE TAX EXEMPTION

• The federal estate, gift, and generation-skipping tax exemption will increase from $5,450,000 to $11,200,000. However, this higher exemption level applies only to your federal tax return and there has been no change to state exemption levels. Massachusetts, for example, allows a $1,000,000 exemption and amounts exceeding this figure are subject to estate tax. As you might expect, state tax laws will now play a greater role in your estate planning.

➢ OTHER PROVISIONS

• In addition to college expenses, you may now pay for primary and secondary education with funds from a 529 Plan.
• The 2018 gift tax exclusion is $15,000 (up from $14,000 in 2017). Our tax group is digging into the details of the new law. As always, feel free to contact us with questions.