Hi, I'm Candace
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The Tax Cuts and Jobs Act, also known just as Tax Reform, is likely to produce some winners and losers when taxpayers file their returns this tax season. Among those who are expected to pay more this year in taxes are those homeowners who have high loan balances, homeowners with non-qualified home equity debt, itemizers whose combined state and local/property taxes amount to more than $10,000, and parents whose dependents are 17 years of age and older.
Here is the list of taxpayers who will suffer the most under the new tax law:
• Taxpayers whose home mortgage loans are above $750,000 and were originated after December 15, 2017 are subject to the new $750,000 mortgage loan limit. The previous limit was $1,000,000.
• All taxpayers that have a HELOC (home equity line of credit) that wasn’t used for acquisition, building or improvements on their primary home – this interest is no longer deductible.
• Taxpayers whose state and local/property taxes are over $10,000 are now subject to the new $10,000 deduction limit. There previously was no limit on this deduction.
• Employees who are no longer permitted to deduct unreimbursed expenses such as home office, mileage, travel, meals and entertainment.
• The good news is that for many small business owners the Tax Reform will be beneficial. However, those self-employed taxpayers whose income is above the threshold ($157,500 for single filers and $315,000 for married filers) will be ineligible for the new Section 199A deduction if they belong in a “specified service trade or business” including doctors, attorneys, accountants, actuaries and consultants.
• Taxpayers with dependents who are 17 years of age and over will lose the dependent exemption and the Child Tax Credit.
• Taxpayers who pay alimony and are divorced after December 31, 2018 – alimony is no longer a valid deduction.
• Taxpayers who receive alimony and will have a final divorce decree before January 1, 2019 will need to claim the alimony as ordinary income.
Candace is the founder of NewWay Accounting and is a CPA who specializes in working with fellow entrepreneurs. She strives to take the fear and anxiety out of taxes and help empower small business owners to feel more confident and in control of their finances. Because even if money isn’t your jam, you deserve to be successful too!
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