Bipartisan Budget Act of 2018
(Extended Tax Relief for 2017)
Signed February 9, 2018
Congress provided for one additional year of tax relief, retroactive to January 1, 2017 and effective for 2017 tax return filings, concerning certain otherwise expired tax provisions. Some of the more popular items of tax relief for individuals include:
Mortgage Debt Exclusion - an exclusion from taxable income regarding debt forgiven on your principal residence up to $2 million in the event of a foreclosure, short sale or loan modification.
Mortgage Insurance Premiums - mortgage insurance premiums paid on loans taken out after Dec 31, 2006 are deductible, subject to some limitations.
Tuition and Fees Deduction - as an alternative to the education credit, qualified expenses comprising tuition and fees (but not books unless purchased directly from the university) up to $4,000 may be deducted to calculate adjusted gross income, subject to AGI limits.
Energy Efficient Improvements - credits are available for certain improvements to your principal residence with a lifetime limit of $500, including a 10% credit for certain metal and asphalt roofs, windows and skylights, exterior doors and insulation. A 100% credit is available for certain central air units, furnaces and water heaters; these, too, are subject to the energy credit's lifetime limit of $500. All of these items are subject to more specific criteria which should be reviewed to determine your eligibility for the respective credit. Other energy credits were addressed in the new tax act as well.
Disaster Victims - special provisions for victims of California wildfires and Hurricanes Harvey, Irma and Maria.
2018 Inflation Amounts
Business mileage rate is $0.545/mi, up 1 cent from $0.535 in 2017.
Medical & moving mileage rate is $0.18/mi, up 1 cent from $0.17 in 2017.
Charity mileage is set by statute and remains unchanged at $0.14/mi.
Household Employee threshold whereby someone who works at your home becomes an employee is $2,100 for 2018, up from $2,000 for 2017.
Gift tax limit is $15,000 beginning January 1, 2018, up $1,000 from 2017.
2018 Filing Season for 2017 Income Tax Returns
The IRS will begin accepting 2017 income tax returns on January 29, 2018. Tax preparation services are available sooner; however, the IRS will not begin processing any returns until January 29th. Illinois will not begin processing returns until February 2. Electronically-filed returns are processed more timely than paper-filed returns.
The filing due date for individuals is April 17, 2018. A timely-filed extension will give taxpayers until October 15, 2018 to complete their returns; however, all tax due must be paid by April 17 in order to avoid IRS and/or states' assessments of penalties and interest.
Individuals who expect to claim the Earned Income Credit (EIC) and/or the Additional Child Tax Credit (ACTC) will need to wait longer to receive their IRS refund. The IRS will hold the entire refund until the end of February. If direct deposit information is provided, the IRS expects refunds with EIC and/or ACTC to be available in taxpayers' bank accounts or on debit cards beginning February 27, 2018. (The PATH Act of 2015 provided for this change in the law so that the IRS has additional time available to review whether refunds are due to identity theft and/or refund fraud.)
H. R. 1 "Tax Cuts and Jobs Act"
Signed into law on December 22, 2017
The ACA penalty for not having minimum essential health insurance coverage is still in effect for 2018 but is eliminated effective 2019.
Tax Rate Schedules:
Effective 2018, the regular and capital gain tax rate schedules have completely changed from that of prior years. Overall, the expected result is a lower rate of tax; however, other provisions may alter one's tax return results.
Taxpayers are encouraged to review their withholding and/or estimated payment schedules early in 2018 to avoid unexpected overwithholding or underwithholding by year end.
For 2018, the standard deductions are as follows:
Single or MFS.........................................$12,000
MFJ or QW..............................................$24,000
For 2018, the additional standard deductions for taxpayers age 65 and older or blind, per person and per event are as follows:
MFJ, QW, MFS....................................... $1,300
Single or HOH...........................................$1,600
The increased standard deductions will expire after 2025.
For 2017 and 2018, all taxpayers who itemize can deduct expenses that exceed 7.5% of AGI for both regular tax and AMT purposes.
For 2019 through 2025, all taxpayers who itemize can only deduct expenses if they exceed 10% of AGI for both regular tax and AMT purposes.
Other Individual Provisions Suspended 2018 - 2025:
(list is not all-inclusive)
Kiddie tax rates for unearned investment income must use the tax brackets applicable to trusts instead of the parent's tax rate.
Personal exemption deductions do not apply.
Mortgage interest deduction on home acquisition debt for a primary and second residence (if a taxpayer itemizes deductions) is reduced to a $750,000 debt limit, down from $1 million (there are exceptions to binding contracts dated before 12-15-17.)
Mortgage interest on home equity debt and lines of credit is no longer deductible.
State and local sales tax and property tax, and state income taxes are deductible if a taxpayer itemizes deductions, but the total deduction will be limited to $10,000 ($5,000 for MFS.)
Casualty losses are only deductible if related to a Federally Declared Disaster Area.
Miscellaneous itemized deductions subject to 2% of AGI such as unreimbursed employee business expenses (mileage, travel, tools and other out-of-pocket expenditures), tax preparation fees, investment fees and repayments of income if $3,000 or less in a year are not deductible. Miscellaneous itemized deductions not subject to the 2% threshold remain deductible.
Itemized deductions are no longer phased out based on AGI.
2017 Inflation Amounts
Business mileage rate is $0.535/mi., down from $0.54 in 2016.
Medical & moving mileage rate is $0.17/mi, down from $0.19 in 2016.
Charity mileage is $0.14 per mile.
Household Employee: The threshold whereby someone who works at your home becomes an employee remains at $2,000.
Gift tax limit remains at $14,000.