Top Tax Changes That Individuals and Small Businesses Need to Know

2 years ago

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On December 22, 2017, President Trump signed into law The Tax Cuts and Jobs Act of 2017 (“TCJA”). The TCJA is the most dramatic change to the tax code in the past 30 years and is effective beginning in 2018. The modifications and changes to the tax code are vast. Below are several important changes that will likely impact our clients – individuals and small businesses.

Reduced Tax Rates and Lower Brackets

The tax rates have been reduced slightly under the TCJA. Additionally, the tax brackets were lowered so that a greater amount of income is taxed at lower rates. These changes, of course, do not mean that you will actually pay less in tax, as there have also been substantial changes to allowable deductions, exemptions and other areas that impact the total tax paid by taxpayers.

Increased Standard Deduction and Elimination of Personal Exemptions

The standard deduction was doubled under the TCJA whereby the new amounts are $12,000 for individuals and $24,000 for married couples. These higher amounts will remove the necessity for many taxpayers to itemize deductions. This increase, however, is potentially offset by the elimination of personal exemptions. Therefore, as with the reduction in tax rates and lowering of tax brackets, the increased standard deduction amounts may not lead to a reduction in the total tax paid by a particular taxpayer.

State and Local Taxes (“SALT”) Capped

The itemized deduction for SALT and property taxes have been combined into a single deduction with a cap of $10,000 for both individuals and married couples. This change will certainly have a negative impact on high-income earners and home owners in high-income-tax states (e.g. New York and California).

Estate Tax Exposure Minimized

The exemption for estate and gift taxes has been increased to $11.2 million for an individual and $22.4 million for a married couple. This change sunsets meaning that the exemption amount would return to the $5 million base in 2026 without further congressional action.

Potential Savings for Eligible Pass-Through Entities

Pass-through business income for sole proprietorships, LLCs, partnerships and S-corporations will continue to pay taxes at ordinary income rates. However, eligible pass-through entities will be eligible for a deduction of 20% of the tax payers allocable share-of-business income, subject to certain limitations. The deduction is available if the owner’s income falls under $157,500 for an individual and $315,000 for a married couple. These deductions are phased out over these amounts with a cap of $207,500 for an individual and $415,000 for a married couple.

The above changes are just a few of the many changes to the tax code. If you wish to discuss any of the above changes, or have other questions or concerns, please do not hesitate to contact your Cabana advisor.

-Louis Shaff, CFO

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The views and opinions expressed are those of the authors do not necessarily reflect the official policy or position of Cabana or its affiliates. Any content provided by our bloggers or authors are of their opinion, and are not intended to malign any religion, ethnic group, club, organization, company, individual or anyone or anything.

Information presented is believed to be current. It should not be viewed as personalized investment advice. All expressions of opinion reflect the judgment of the authors on the date of publication and may change in response to market conditions. You should consult with a professional advisor before implementing any strategies discussed. Content should not be viewed as an offer to buy or sell any of the securities mentioned or as legal or tax advice. You should always consult an attorney or tax professional regarding your specific legal or tax situation.

Viewers or recipients of the information herein that do not agree with the term and conditions of use, should not utilize this website or any information contained herein. Decisions based on information contained herein are the sole responsibility of the person viewing the website. In exchange for utilizing the information on this website, the visitor agrees to indemnify and hold Cabana Asset management, its officers, directors, employees, affiliates, agents, licensors and suppliers harmless against any and all claims, losses, liability, costs and expenses (including but not limited to attorneys’ fees) arising from the use of this website, violation of these terms or from any decisions that the viewer makes based on such information.

Please consult with a tax advisor before making any decisions.

Disclaimers

Cabana LLC (dba “Cabana Asset Management” and “Cabana Retirement Solutions”), is an SEC registered investment adviser with offices in Arkansas, Texas and Colorado. Cabana only transacts business in states where it is properly registered or is exempted from registration requirements. Registration as an investment adviser is not an endorsement of the firm by securities regulators and does not mean the adviser has achieved a specific level of skill or ability. Additional information regarding Cabana, including its fees, can be found in Cabana’s Form ADV, Part 2. A copy of which is available upon request or online at https://www.adviserinfo.sec.gov/.

By using this website the user agrees as follows:

All written content on www.thecabanagroup.com website (the "Website") is for informational purposes only. The material presented is believed to be from reliable sources and no representations are made by Cabana, LLC, Cabana Law Group, or Cabana Financial, LLC (collectively, “Cabana”) or its affiliates as to another parties’ informational accuracy or completeness. All information or ideas provided should be discussed in detail with a financial advisor, accountant or legal counsel prior to implementation. No party, including but not limited to, Cabana and its affiliates, assumes liability for any loss or damage resulting from errors or omissions or reliance on or use of this material.

The views and opinions expressed are those of the authors do not necessarily reflect the official policy or position of Cabana or its affiliates. Any content provided by our bloggers or authors are of their opinion, and are not intended to malign any religion, ethnic group, club, organization, company, individual or anyone or anything.

Information presented is believed to be current. It should not be viewed as personalized investment advice. All expressions of opinion reflect the judgment of the authors on the date of publication and may change in response to market conditions. You should consult with a financial advisor before implementing any strategies discussed. Content should not be viewed as an offer to buy or sell any of the securities mentioned or as legal or tax advice. You should always consult an attorney or tax professional regarding your specific legal or tax situation.

Viewers or recipients of the information herein that do not agree with the term and conditions of use, should not utilize this website or any information contained herein. Decisions based on information contained herein are the sole responsibility of the person viewing the website. In exchange for utilizing the information on this website, the visitor agrees to indemnify and hold Cabana, its officers, directors, employees, affiliates, agents, licensors and suppliers harmless against any and all claims, losses, liability, costs and expenses (including but not limited to attorneys' fees) arising from the use of this website, violation of these terms or from any decisions that the viewer makes based on such information.