Tax opportunities to consider during the 2018 filing season

It’s easy to get wrapped up in the negative buzz surrounding the upcoming tax filing season. Complicated changes, multiple areas without sufficient guidance, timing of the forms being available, software changes, state and local conformity… the list can go on.

Although the challenges are certainly there, it’s important to remember that the Tax Cuts and Jobs Act provides taxpayers with a few gifts along the way (it was called the Tax Cuts and Jobs Act – after all)!

Lurie is here to remind you of some benefits to consider with your 2018 filings:

Individuals

Lower tax rates

Tax rates were dropped for certain populations. If you fall into this threshold, more money could be in your pocket with your refund.

Standard Deductions

If you are not able to itemize, fewer receipts and documentation may be required. With the increase in the standard deduction, some people may find that itemizing their deductions simply no longer makes sense. However, if you do claim the standard deduction, you may need to hold on to fewer pieces of documentation to support your position.

Increase in the child tax credit

Have children? This is another area where you may find some additional benefit on your return.

199A / Partnership pass-through deduction

If you have a partnership or flow-through interests, you may be eligible for an additional deduction through 199A. This provision, although it could be a complicated calculation depending on your facts and circumstances, could prove very beneficial.

Alternative Minimum Tax (AMT)

If you’ve historically been in AMT, the Tax Cuts and Jobs Act made it more difficult for people to find themselves in an AMT position. This pesky calculation might no longer be something you have to worry about!

Opportunity Zones

If you’re triggering capital gains, investing in an opportunity fund that conducts business within an opportunity zone could be beneficial. This provision allows for an immediate deferral of capital gains if those gains are invested within opportunity zones. If you hold the investment long enough, the benefits may increase.

Increase in the estate and gift tax exclusion amounts

The ability to transfer wealth tax-free increased to $10 million (adjusted for inflation) effective for decedents dying and gifts made after 2017 and before 2026.

Expansion of the ability to use 529 plans

Distributions from 529 plans may now be used for elementary or secondary education expenses up to $10,000 per-year per-student.

Businesses

Lower tax rates

Corporations are now taxed at a 21% rate and partnerships will see reduced rates as well.

Bonus depreciation and increased Section 179 eligibility

Bonus depreciation increased to 100% for 2018 through 2022 and additional items including roofs, HVAC systems, fire protection and alarms, and security systems are now eligible for immediate expensing under Section 179. If you buy items of tangible personal property, chances are good that you’ll be able to write off the entirety of the purchase in 2018.

Family and medical leave credit

If you’ve made payments to workers on Family or Medical Leave during 2018 – you may be eligible for an additional credit.

Technical terminations of partnerships no longer exist

Inadvertent terminations of partnerships had the potential to catch taxpayers off guard in years past. Now, technical terminations of partnerships don’t have to be a worry.

AMT repealed – the corporate AMT is no more!

Greater potential for utilizing the cash method of accounting

If a business has under $25 million in gross receipts, they may be eligible to use the cash method of accounting – expanding from $10 million and removing certain industry obstacles.

Reduction in the number of businesses that may be subject to 263A – Uniform Capitalization Rules

Again, if the business falls under a $25 million gross receipts threshold, the requirement to add additional costs to inventory under 263A may be no more.

Greater potential for expensing inventory in the current year

There’s also potential to expense inventory if a business satisfies certain requirements, including being under $25 million in gross receipts.

With all of these changes, it’s important to remember that there is an option to extend your return to allow for:

  • The potential for additional planning
  • The ability for additional guidance to be released
  • A better understanding of what all of these changes may mean to you

Remember, if you have any tax payments due related to your 2018 filing, they still need to be made by the original, non-extended due date. The actual completion and filing of the return could be pushed later into the year with an extension – giving you and your tax preparer some additional time to digest. If you haven’t extended in the past, this year may be the year to give it a try!

If you have any questions or would like more information on any of these topics, please contact your Lurie advisor.

 

Julie A. Helms, CPA

 

 

 

 

 

 

 

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