Plain and Simple: Bright Business Insights Winter 2018 | Page 3

Additionally, meals provided for convenience of a company’s • Standard deduction is set to increase. The standard deduction is employees went from 100 percent deductible to 50 percent increasing across the board and is indexed for inflation for years deductible. After 2025, meals will become nondeductible. Finally, after Dec. 31, 2018. The deduction for the elderly and the blind van pooling and other transportation benefits are disallowed for remains intact. The increased standard deduction amounts are set employers, and are nontaxable for employees. Bicycle commuting to sunset after Dec. 31, 2025, and are effective beginning after reimbursements, however, are deductible by the employer, but not Dec. 31, 2017. They are $24,000 (married, filing jointly), $18,000 the employee. (head of household) and $12,000 (single). Given these increases, it will no longer make sense for many taxpayers to itemize their Changes In Store For Individuals deductions. Medical expenses are deductible to the extent they From an individual taxpayer perspective, highlights include: exceed 7.5 percent of adjusted gross income for all taxpayers instead of the previous 10 percent for most taxpayers. • Tax rate adjustment. With the passage of the TCJA, individual • Personal exemptions are suspended. The new law suspends tax rates are now lower at 10, 12, 22, 24, 32, 35 and 37 percent, the deduction for personal exemptions. Thus, beginning in which are set to expire after 2025. Capital gains and qualified 2018, taxpayers can no longer claim personal or dependency dividends will retain present law maximum rates of 15 percent exemptions. The ru les for withholding income tax on wages will and 20 percent plus the 3.8 percent surtax, where applicable. Additionally, the “kiddie tax” rules were simplified. Now the be adjusted to reflect this change. • A new deduction for “qualified business income.” Starting in child’s tax is unaffected by the parent’s tax situation or the 2018, individual taxpayers are allowed to deduct up to 20 percent unearned income of any siblings. of qualified business income or pass-through income (i.e., income from partnerships, S corp, LLCs and sole proprietorships plus trusts and estates). The income must be from a trade or business within the U.S. Professional services and investment income does not qualify, nor do amounts received from an S corporation as reasonable compensation. The deduction is not used in computing adjusted gross income, just taxable income. Other rules do apply. • The child and family tax credit is going up. This credit has been increased to $2,000 from $1,000 and increases the refundable portion of the credit for qualifying children younger than 17 to $1,400. Additionally, there is a new (nonrefundable) $500 credit for a taxpayer’s dependents who are not qualifying children. • State and local taxes. There is now a total limit of $10,000 for the itemized deduction for state and local income and property taxes starting in 2018. Even though the TCJA appears daunting, your Rea & Associates advisors are here to answer any questions you may have. Additionally, the Rea team is also available to discuss tax strategy that could help maximize your savings. by: Tom Jeffries, CPA Principal 212 North Washington St. Millersburg, OH 44654 [phone] [email protected]