Coughenour & Associates, Inc. dba MyTaxPilot

3781-D Westerre Parkway

Henrico, VA 23233

Office:  804-740-6742

Fax:  888-729-3220

© Copyright 2018 MyTaxPilot

TAX LAW UPDATE & INFORMATION

WE ARE QUALIFIED, READY, WILLING AND ABLE TO ASSIST YOU WITH ALL OF YOUR TAX NEEDS.

Be on the Alert for more updates to the Tax Law Changes section. You can always call us to discuss your particular questions and needs. For further explanations of how any of these changes may effect you or your business, please call our office for an appointment  to discuss your situation further.

The 2018 Standard Mileage Rate:

The 2018 standard mileage rate for business driving increases to 54.5 cents a mile, up 1 cent from the rate for 2017.  The rate increases to 18 cents a mile for travel for medical purposes and job-related moves. 

Expenses:

$510,000 of assets can be expensed in 2017, and this figure phases out dollar for dollar once over $2,030,000 of assets are put into service during the year.

Standard Deductions:

The 2018 standard deductions almost doubles.  Married couples get $24,000 plus $1,300 for each spouse age 65 or older.  Singles can claim $12,000, $13,300 if 65 or up.  Household heads get $18,000, plus $1,300 once they reach age 65.  Blind people receive $1,300 more ($1,550 if unmarried and not a surviving spouse). 

Itemized Deductions:

High-incomers lose itemized deductions starting at a higher level in 2017. Their write-offs are slashed by 3% of the excess of AGI over $261,500 for singles, $287,650 for household heads and $313,800 for marrieds. But the total reduction can’t exceed 80% of itemizations. Medicals, investment interest, casualty losses and gambling losses (to the extent of winnings) are exempted from this cutback.

Personal Exemptions:

Personal exemptions are gone!  They are replaced by the higher standard deductions. 

Dividends & Long-Term Gains:

The 20% top rate on dividends and long-term gains starts at a higher amount for 2017: Singles with taxable income above $418,400, household heads over $444,550 and joint filers above $470,700. The 3.8% Medicare surtax boosts the rate to 23.8%. The regular 15% maximum rate applies for filers with incomes below these amounts, except that filers in the 10% or 15% income tax bracket still get the special 0% rate.

Social Security:

The Social Security wage base increases in 2019 to $132,900.  The Social Security tax rate on employers and employees remains at 6.2%. The employer’s share of Medicare tax stays at 1.45% of all pay. The employees’ share is 1.45%, too, but they also pay the 0.9% Medicare surtax on wages that exceed $200,000 for singles and $250,000 for married couples. This extra levy doesn’t hit employers. Self-employeds are also subject to the surtax.

Social Security recipients will see a tiny 0.3% hike in their benefits in 2017. The earnings test limits are heading up, too. People who turn 66 in 2017 do not lose any benefits if they earn $44,880 or less before they reach that age. Individuals who are 62 through 65 by the end of 2017 can make up to $16,920 before they lose any benefits. There is no earnings cap once a beneficiary turns 66. The amount needed to qualify for coverage climbs to $1,300 a quarter. So earning $5,200 anytime during 2017 will net the full four quarters of coverage.

Medical Deductions:

The threshold for deducting medical expenses on Schedule A is reduced to 7.5% of AGI for all taxpayers.  Starting with 2019, this threshold reverts to 10%. 

Medical Deductions:

The threshold for deducting medical expenses on Schedule A is reduced to 7.5% of AGI for all taxpayers.  Starting with 2019, this threshold reverts to 10%. 

Estate & Gift Tax Exemption: 

Retirement Plans:

The maximum contribution limit for 401(k) accounts in 2018 is rising to $18,500 for elective contributions, up from $18,000 in 2017.   Workers 60 and over will be allowed to contribute a maximum of $24,500 in elective contributions in 2018, compared with $24,000 in 2017.  The cap on SIMPLEs stays at $12,500, $15,500 for individuals age 50 and older.  However the payin limit for defined contribution plans goes up to $55,000. 

IRAs & Roth IRAs:

The 2018 limits for IRAs and Roth IRAs also stay steady at $5,500, plus $1,000 as an additional catch-up contribution for taxpayers age 50 and up.

Expiring Tax Breaks as of

January 1, 2018:

The exclusion of up to $2 million of forgiven debt on primary residences. The credit for installing energy-efficient windows and exterior doors in one’s home. The write-off for private mortgage insurance. The 30% credit for geothermal heat pumps, wind turbines and fuel cell property. Credits for biodiesel and other alternative fuels as well as two-wheeled electric vehicles  Congress can extend these tax breaks this year, we will just have to wait and see.

Health Reimbursement Arrangements Now Allowed Again!

Employers can contribute annually to each employee’s HRA up to $4,950… $10,000 for family coverage. And the HRA must be funded solely by the employer to pay for or reimburse medical care expenses, including health insurance premiums, of employees and their families.

Employee Travel Reimbursement:

IRS’s simplified per diems for lodging, meals and incidentals are rising a bit. In high-cost localities, employees can get up to $282 per day free of tax, an increase of $7. In other areas, their daily stipend is capped at $189, up $4. See www.kiplinger.com/letterlinks/diems for details. Businesses using this method have the choice of applying these new rates as of Oct. 1 or waiting until Jan. 1, 2017. Firms can opt instead to use federal per diems separately figured for hundreds of cities. No change to the rates for meals and incidentals only… staying at $68 per day in high-cost areas and $57 in other locations. Self-employed individuals on travel are allowed to use these rates in lieu of keeping receipts, but their lodging expenses must be substantiated separately. They cannot use the full $282/$189 per diems. The per diem rate solely for incidentals is also unchanged at $5 a day.

HSA Contributions:

The 2018 annual contribution limit that individuals with single medical coverage can contribute to a health savings account is $3,450, an increase of $50 from 2017.  The annual

HSA contribution limit is $6,900 for those covered under qualifying family medical plans (up from $6,750 in 2017). 

The estate and gift tax exemption for 2017 rises to $5.6 million per individual.  The annual gift exclusion amount is $15,000 for 2018 - up from $14,000.