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Tax Reform Arrives . . . Changes Affecting your 2017 Tax Return

Welcome to President Trump’s long-awaited tax bill, the Tax Cuts and Jobs Act. Since the reform purports to overhaul the entire U.S. tax code by making our individual and business income tax return process simpler, virtually all taxpayers will be affected in some way.

Is the tax reform law good or bad for you? You’ll need to run the numbers first, but suffice it to say the extent of your changes will likely depend on your income bracket, current filing status and typical annual deductions. Most will be in a better place, but it appears a few of us may need to tighten our belts just a bit.

After reviewing the major tax changes, some answers are available now, but many details remain uncertain until final regulations and forms are produced over the next year or so.

With 1,097 pages in the Act, we’ll highlight the 2017 income tax changes first, (with additional information regarding 2018 changes outlined in next week’s blog), many of which you’re likely familiar with already.

With some trimming here, some make up there, and a few unexpected surprises, your 2018 income tax return will look different. Until then, note some changes before you file your 2017 individual and business income taxes. Plenty of time remains to learn and prepare before planning next year’s taxes, since only three significant changes affect our 2017 taxes:

  • The medical deduction threshold dropped from 10 percent to seven and a half percent of adjusted gross income (AGI), but only for two years.
  • The mortgage interest deduction on your home is still limited to the interest on $1,000,000 plus that on the first $100,000 of a home equity line of credit (HELOC), unless your new loan initiated after December 15, 2017, for which the limit will be based on a $750,000 mortgage. New HELOCs receive no deduction. Refinancing will qualify under the old limits, but a cap remains based on acquisition costs.
  • Capital assets acquired after September 17, 2017 are 100% deductible under bonus depreciation rules, phasing out after 2023; real estate excluded.

After months of speculation, lobbying and political pontificating, we’re following a new, and some would say, improved, tax code. Most of us will be better off in some ways, but a few will be disappointed. This simplification of our filing process should prove beneficial, regardless of your tax bracket.

For additional information look for our upcoming annual tax newsletter, which provides more details on this historic tax reform. And remember, if you need a proven tax accounting firm to assist with your tax preparation or financial planning, our team is available to assist you. Contact us at Office@CPAsite.com or 904.396.5400.

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