tax lawyer in montgomery county

The Tax Cuts and Jobs Act (TCJA) is a huge and complicated revision of the federal tax law.  It will take some time and expertise to parse out exactly how it will affect each of us as individuals.  How Congress intends to “pay” for this law remains to be seen since a projected reduction in tax revenues of $1.5 trillion over the next 10 years will be added to the current deficit.  There is talk currently of “entitlement reform” or reducing/eliminating Medicare, Medicaid, and/or Social Security benefits.  Keep alert for more to come on these subjects, and contact a tax lawyer in Montgomery County with any questions.

 

Some of the highlights of the tax reform include:

  • Estate taxes. If you were concerned about the size of your estate getting too close to the exemption for federal estate tax, worry no longer.  To avoid the 40 percent federal estate tax, your estate must be less than $11.18 million (estimated) for individuals or $22.36 million (estimated) for married couples, which will then be indexed for inflation.  This exemption applies to federal gift tax and generation skipping taxes also.
  • Medical expense deduction. It is important to pay attention to this provision, especially those with high medical expense this year.  Medical expenses in excess of 7.5 percent of the adjusted gross income can be deducted in 2017 and 2018.  After that, it reverts back to a 10 percent “floor.” Many older and disabled persons have high medical expenses for which they may have been tapping an IRA account.  Consult your tax advisor for assistance with this for this year’s tax return.
  • Home equity loan interest. The new law eliminates a deduction for interest paid on a home equity loan.  Many older persons have paid off mortgages but have home equity loans in place.  Be careful if you planned to deduct the interest next year.
  • State and Local tax deduction. “SALT” (state and local tax deduction) is subject to a cap of $10,000.
  • Standard deduction and personal exemption. The standard deduction increases to $12,000 for individuals, $18,000 for heads of households, and $24,000 for joint filers, subject to adjustments for inflation.  Personal exemptions largely disappear.  Coupled with the “SALT” cap, many tax filers may opt to not itemize and just use the standard deduction.

Most of the new provisions, other than the medical expense deduction, do not take effect until 2018 for tax filing in 2019.  Most of the provisions, other than the corporate tax rate deduction, “sunset” on December 31, 2025, returning to the current form unless Congress acts in the meantime.  There are likely to be “technical corrections” to the bill as unforeseen complications occur.  Stay tuned as the experts “unpack” the TCJA.

Still have questions? Contact a tax lawyer in Montgomery County today.

— Written by Kathleen M. Martin, Esq., CELA*

*Certified as an Elder Law Attorney by the National Elder Law Foundation as authorized by the Pennsylvania Supreme Court.

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