Highlights of Tax Reform as per the Tax Cuts and Jobs Act (TCJA)
Tax Table for Tax Year 2018
1. Married Filing Jointly
- $0 to $19,050 = 10%
- $19,051 to $77,400 = 12%
- $77,401 to $165,000 = 22%
- $165,001 to $315,000 = 24%
- $315,001 to $400,000 = 32%
- $400,001 to $600,000 = 35%
- $600,001 and over = 37%
The AMT exemption amount for TY 2018 is $70,300 ($109,400 married/joint). The income level at which the AMT exemption begins to phase out has increased to $500,000 or 1,000,000 if married filing jointly.
2. Personal and dependent exemption have been repealed.
3. Standard deduction for joint filers has been raised to $24,000 for year 2018.
4. Child Tax Credit has been increased to $2000 per child, Introduction of $500 dependent credit.
5. The TCJA eliminates the moving expenses deduction on the Tax Return.
6. Repeal of deduction for alimony payments. Alimony is no longer deductible by the payor spouse nor included in the recipient spouse’s gross income for any divorce or written separation agreement executed after December 31, 2018.
7. Deduction for State and Local income taxes and property taxes is limited to $10,000 under Itemized deduction.
8. Mortgage Interest Deduction of mortgage interest is limited to $750,000 of mortgage on Principal residence purchased after December 15, 2017.
9. Miscellaneous Itemized deductions subject to 2% floor are repealed under TCJA. This includes Tax Preparation Fees, Unreimbursed employee business expenses, Home office for employees, Investment advisor fees.
10. Maximum 20% deduction on Qualified Business Income from Pass through Entities. There are complex rules for eligibility of such deduction.
These are Federal Tax updates. States may not conform to these changes. This has made tax filing more complex !!!!
Individual Tax Identification Number (ITIN)
If you have not used your ITIN on US Tax Return at least once for tax years 2015,2016 or 2017, your ITIN would expire by December 31, 2018.
Additionally, all ITINs issued before 2013 have begun expiring from 2016, this year, renewal is required for ITINs with middle digits of 73,74,75,76,77,81 or 82 (Example: (9XX-73-XXXX). IRS will send letter to taxpayers with these expiring ITINs. All expired ITINs must be renewed before being used on a U.S. tax return.
Foreign Account Tax Compliance Act (FATCA)
Foreign Income to be reported on US Tax Return
US Citizens, Resident Aliens and those who have substantial presence in US for any given year, need to report their worldwide income on US Tax Return.
FBAR Return- FINCEN 114
Taxpayers with an interest in, or signature or other authority over, foreign financial account/s whose aggregate value exceeded $10,000 at any time during the year generally must file FINCEN-114 with US Treasury. This return must be filed before 15th April. There is a provision of automatic extension for another six months for filing.
For more information, please visit, http://bsaefiling.fincen.treas.gov/docs/FBAR_EFILING_FAQ.pdf
Reporting Foreign Financial Assets and Accounts
Under FATCA, certain U.S. taxpayers holding financial assets outside the United States must report those assets to the IRS on Form 8938, Statement of Specified Foreign Financial Assets. There are serious penalties for not reporting these financial assets (as described below). This FATCA requirement is in addition to the long-standing requirement to report foreign financial accounts on FinCEN Form 114. For Taxpayers living in US and filing married filing Joint income tax return, they need to report on Form 8938; if the total value of specified foreign financial assets is more than $100,000 on the last day of the tax year or more than $150,000 at any time during the tax year.