Looking for the latest comparison of old versus new rules according to the 2018 Tax Cuts & Jobs Act A.K.A. tax reform? Our helpful chart give you a quick guide to the latest updates.
Please contact your trusted advisor at Apple Growth Partners with any questions about how tax reform may effect you and your business.
|Issue||Prior Law||New Law|
|Corporate Tax Rate||Four brackets (10%, 25%, 34% 35%). 34% rate starts at income of $75,000.||21% permanent starting in 2018|
|Individual Tax Rate||Seven brackets (10, 15, 25, 28, 33, 35, 39.6)||Seven brackets (10, 12, 22, 24, 32, 35, 37) with higher thresholds for most brackets. Expires after 2025.|
|Passthrough Tax Rate||Individual marginal rates||20% deduction on qualifed business income. Eligible income for partnership or S corp owner limited to 50% of wages or 25% of wages plus 2.5% of business assets. Specified service business income is not eligible for the deduction. Taxpayers with taxable income less than $157,500 ($315,000 filing joint) would be exempt from wage limitation and would be eligible to treat service income as qualified business income. Expires after 2025.|
|Bonus Depreciation||50% bonus depreciation on qualified property purchased new||100% bonus depreciation for qualified property purchased new or used and placed in service from 09/27/2017-12/31/2022|
|Section 179 Deduction||Up to $500,000 of eligible property can be expensed annually.||Up to $1M of eligible property can be expensed annually.|
|Small Business Accounting Changes||Certain entities over $5M in annual receipts must use accrual method of accounting instead of cash (unless inventories exist than threshold is lowered to $1M)||Cash method threshold increases to $25M annual revenue regardless of inventory (including three prior tax periods)|
|Business Interest Deduction||Business interest fully deductible subject to certain limitations||Limitation on business interest expense to 30% of business’ adjusted taxable income. Can elect to not apply to real estate businesses. Does not apply to businesses with less than $25M of annual revenues.|
|Like Kind Exchange||Real or personal property||Only real property not held primarily for sale|
|Domestic Production Activities Deduction||9% of the lesser of qualified production activities and business’ taxable income||Eliminated beginning in tax years after 12/31/2017|
|Meals and Entertainment Expense Deduction||50% deductible if directly related to trade or business||Entertainment deduction eliminated, meals deduction retained.|
|Standard Deduction||$6,350 individual, $12,700 joint filers||$12,000 individual, $24,000 joint filers. Expanded deduction expires after 2025.|
|Property Tax Deduction||Permitted as itemized deduction||Limited to $10,000 aggregate for property taxes and state and local income/ sales tax. Change applies from 2018 to 2025.|
|State and Local Tax Deduction for Non Business Income||Permitted as itemized deduction||Limited to $10,000 aggregate for property taxes and state and local income/ sales tax. Change applies from 2018 to 2025.|
|Mortgage Interest Deduction||Permitted up to $1.1M in debt on two personal residences as itemized deduction||Permitted on $750,000 of home acquisition indebtedness. Deduction of interest on home equity indebtedness disallowed. Expires after 2025.|
|Principal Residence Gain Exemption||Gain excluded on sale up to 250,000 for individuals ($500,000 for joint filers). Taxpayer must use the home for two of five years. Available only once every two years.||No change to prior law.|
|Personal Exemptions||$4,000 per filer and dependent||Eliminated. Expires after 2025.|
|Estate Tax||40% with $5.5M exemption||40% with $11M exemption. Exemption reverts to 2017 level (adjusted for inflation) after 2025.|
|Alternative Minimum Tax Regime||Affects over 4.5M American personal and corporate filers||Corporate AMT eliminated. Higher thresholds for personal AMT.|
|R & D Credit||Credit allowed for qualified research expenditures||Credit retained|
The information contained in this article is current through the published date and may change when regulations and other guidance are issued. Content has been vetted by Apple Growth Partners’ internal tax reform team of licensed CPAs. For more information about this content, or any other matters related to tax reform, please contact your Apple Growth Partners advisor.