What’s New

What’s New for 2018

What’s new for 2018-Tax Law changes every year. We keep track of the tax law changes to help you get your maximum refund and credit. Here are highlight of changes in 2018 for your reference. Congress passed the Tax Cut and Jobs Act (TCJA) in December 2017. The TCJA makes change that affect all kinds of tax such as individual, S and C corporation, partnership and other “pass through” business entities, estate, and tax-exempt organizations. Most changes take effect on January 1, 2018 or later. The IRS estimates that they will need to create or revise more than 400 taxpayer forms, instructions and publications for the filing season starting in 2019. It’s more than double the number of forms they would create or revise in a typical year.

New 1040 Design: IRS forms 1040, 1040A, 1040EZ consists of a two-sided, half-page form. Some sections from the previous design were moved to supporting schedules.

Tax return filing begin date and due date: 2019 tax filing season (for 2018 individual tax return) begins Monday, Jan 28 for Nation’s taxpayers and tax returns due April 15. The filing deadline to submit 2018 tax returns is Monday, April 15, 2019. If you file extension on April 15, 2019, you have an automatic 6 month extension to file your income tax return for 2018 on October 15, 2019. When you file extension, don’t forget to pay the estimate tax. Any unpaid tax will be charged the penalty and interested until you pay in full.

Deadline Tax Tip: The penalties for not filing are higher than not paying taxes, thus don’t miss a filing deadline if you owe taxes, even if you can’t pay your taxes on time, since the late filing penalties are generally significantly higher than the not paying taxes on time penalties. Efile and pay as little or as much as you can afford.

If you are a nonresident alien and earn wages subject to U.S. income tax withholding, your 2018 U.S. income tax return (Form 1040NR or Form 1040NR-EZ) is due by: April 15, 2019. If you don’t earn wages subject to U.S. income tax withholding, your return is due by: June 17, 2019. If you are a U.S. citizen or resident; and on the due date of your return that you are living outside the United States and Puerto Rico, and your main place of business or post of duty is outside the United States and Puerto Rico; or b. You are in military or naval service on duty outside the United States and Puerto Rico, you are allowed an automatic 2-month extension without filing form 4868 (until June 17, 2019). However, if you pay the tax due after the regular due date (April 15, 2019) interest will be charged from that date until the date the tax is paid in full.

Partnership and S corporation income tax returns are due on March 15, 2019 and C corporation income tax return are due on April 15, 2019. You may request an automatic 6-month extension of time to file the return by filing Form 7004 by the due date. When you file form 7004, deposit what you estimate you owe in tax. Then, file the return before 6 month extension to pay any tax, interest and penalty due.

Tax tip: Refunds and pay tax in 2019: Choosing e-file and direct deposit for refunds remains the fastest and safest way to file an accurate income tax return and receive a refund. However, the IRS does not accept some of efile, such as apply ITIN with individual tax return or some nonresident aliens 1040NR do not qualify for efile. The IRS still anticipates issuing more than nine out of 10 refunds in less than 21 days if you do efile, but there are some important factors to keep in mind for taxpayers.

The quickest, easiest way to make a tax payment is through efiling or paying online from IRS website. If you prefer to pay in cash, the IRS offers a way for you to pay your taxes at a participating retail store. It generally takes five to seven business days to process your payment. Be sure to plan ahead of your due date to ensure your payment is posted timely.

If you can’t pay the full amount due with your return, you may ask to make monthly installment payments. You may be able to apply online for a payment agreement if you owe federal tax, interest, and penalties after you file your tax return.

Individual Tax Identification number (ITIN):

IRS is taking vital steps to strengthen and protect the integrity of the process for issuing the individual taxpayer identification number (ITIN). ITINs are used by people who have tax-filing or payment obligations under U.S. law but are not eligible for a Social Security number. In addition, any ITIN middle digits of 73, 74, 75, 76, 77, 81 or 82 (eg. 9NN-73-NNNN) was expired on December 31, 2018. Any ITIN that have not been used on ta tax return for Tax year 2015, 2016 or 2017 will expire December 31, 2018. Currently, a complete and accurate renewal application can be processed in as little as seven weeks. But this timeframe is expected to expand to as much as 11 weeks during tax season, which runs from mid-January through April. If you don’t need to file your tax return, you don’t need to renew your ITIN. Or if your ITIN is only used on information returns and you will not be filing a tax return or claim for refund, you do not need to renew your ITIN. However, timely file a renew for you, your spouse or dependents’ ITIN can avoid a delay in processing your tax return. We are Certified Acceptance Agents (CAA) and we are able to help to apply or renew ITIN for you with right documents to IRS.  You don’t need to travel to IRS office by yourself and your spouse or dependents.

Affordable Care Act (ACA) Tax Provisions:

The Health Insurance Penalty: Ends in 2019

President Donald Trump with the help of Congress has rescinded the penalty of the Affordable Care Act beginning on January 1, 2019. For those uninsured in 2018, they will still have to pay the penalty.

According to the Affordable Care Act, if you do not get health insurance coverage, you will be penalized at tax time. To avoid a penalty for no health insurance, you must have either a valid exemption or you must be enrolled on a qualified health plan. If you are uninsured for part of the calendar year, you may still be exempt from a penalty so long as you are uninsured for less than three consecutive months. You may also be exempt from a penalty if you are part of a Federally-recognized American-Indian tribe, are enrolled on a grandfathered plan*, or are enrolled in a Health Care Sharing Ministry (HCSM).

In 2017 and 2018, the penalty increases to the greater of $695 per adult and $347.50 per child, plus COLA (“Cost of Living Adjustment”), or 2.5% of your taxable household income minus the federal tax-filing threshold The Health Insurance Penalty ends in 2019.

The law requires you and your dependents to have health care coverage, an exemption, or make a payment with your return.  If you purchased coverage from the Health Insurance Marketplace, you may be eligible for the premium tax credit. See ACA topics later. You may receive one or more forms relating to health care coverage you had last year. New Forms are 1095-A Health Insurance Marketplace Statement, 1095-B Health Coverage, and 1095-C Employer-Provided Health Insurance Offer and Coverage which may affect your individual income tax return. If you are expecting to receive a Form 1095-A, you should wait to file your 2018 income tax return until you receive that form. 

2018 Tax Law Highlight or Changes

Changes in Tax Rates

For 2018, most tax rates have been reduced. This means most people will pay less tax starting this year. The 2018 tax rates are 10%, 12%, 22%, 24%, 32%, 35%, and 37%. In addition, for 2018, the tax rates and brackets for the unearned income of a child have changed and are no longer affected by the tax situation of the child’s parents. The new tax rates applicable to a child’s unearned income of more than $2,550 are 24%, 35%, and 37%. Most of the changes in this legislation take effect in 2018 for federal tax returns filed in 2019. It is important that individual taxpayers consider what the TCJA means and make adjustments in 2018 and 2019.

Review your withholding again, after file 2018 tax return to make sure you don’t have too little or too much withheld from your paychecks next year. You may submit new W4 to your employer and same for State.

Personal exemptions

Personal and dependent exemptions are eliminated under new TCJA from 2018 to 2025. You are not able to reduce the income that subject to tax by the exemptions amount for each person included on your tax return as you have in previous year such as yourself, your spouse or your dependents.

Child tax credit and additional child tax credit:

For 2018, the maximum credit increased to $2,000 per qualifying child (child under 17). Up to $1,400 of the credit can be refundable for each qualifying child as the additional child tax credit. In addition, the income threshold at which the child tax credit begins to phase out is increased to $200,000, or $400,000 if married filing jointly.

Credit for other dependents:

A new credit of up to $500 is available for each of your qualifying dependents other than children who can be claimed for the child tax credit. The qualifying dependent must be a U.S. citizen, U.S. national, or U.S. resident alien. The total of both credits is subject to a single phase out when adjusted gross income exceeds $200,000, or $400,000 if married filing jointly. You may be able to claim this credit if you have children age 17 or over, including college students, children with ITINs, or other older relatives in your household.

Social security number required for child tax credit (New Change):

Beginning with Tax Year 2018, your child must have a Social Security Number before the due date of your tax return (including extensions) to be claimed as a qualifying child for the Child Tax Credit or Additional Child Tax Credit. If your dependent child lived with you in the United States and has an ITIN, but not an SSN, issued by the due date of your 2018 return (including extensions), you may be able to claim the new Credit for Other Dependents for that child. Spouses and dependents residing outside the United States who use ITIN should review the information on IRS.gov/ITIN to determine whether they need to renew an ITIN before filing a tax return next year. They do not need to renew their ITINs if they would have been claimed as dependents qualifying for this personal exemption benefit and not for any other benefit. This is a non-refundable credit of up to $500 per qualifying person.

Alternative minimum tax (AMT) exemption amount increased:

The AMT exemption amount is increased to $70,300 ($109,400 if married filing jointly or qualifying widow(er); $54,700 if married filing separately). The income level at which the AMT exemption begins to phase out has increased to $500,000 or $1,000,000 if married filing jointly.

Changes to Standard Deduction:

The standard deduction is a dollar amount that reduces the amount of income on which you are taxed and varies according to your filing status. The standard deduction reduces the income subject to tax. The Tax Cuts and Jobs Act nearly doubled standard deductions. When you take the standard deduction, you can’t itemize deductions for mortgage interest, state taxes and charitable deductions on Schedule A, Itemized Deductions. Starting in 2018, the standard deduction for each filing status is: Single……………………………………………………………………………$12,000 …….(up from $6,350 in 2017)

Married filing jointly. Qualifying widow(er) …………$24,000 …….(up from $12,700 in 2017)

Married filing separately ……………………………………$12,000 …….(up from $6,350 in 2017)

Head of household…………………………………………….$18,000 …….(up from $9,350 in 2017)

The amounts are higher if you or your spouse are blind or over age 65. Most taxpayers have the choice of either taking a standard deduction or itemizing. If you qualify for the standard deduction and your standard deduction is more than your total itemized deductions, you should claim the standard deduction in most cases and don’t need to file a Schedule A, Itemized Deductions, with your tax return.

There are more update upon by request.

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What’s new for 2017

What’s New for 2017 –Tax Law changes every year. We keep track of the tax law changes to help you get your maximum refund and credit. Here are highlight of changes in 2017 for your reference. Congress just passed the Tax Cut and Jobs Act (TCJA). The TCJA makes change that affect all kinds of tax such as individual, S and C corporation, partnership and other “pass through” business entities, estate, and tax-exempt organizations. Most changes take effect on January 1, 2018 or later. The returns for 2017 tax year which we currently prepare are generally not affected.

Tax return filing begin date and due date: 2018 tax filing season (for 2017 individual tax return) begins Jan 29 for Nation’s taxpayers and tax returns due April 17. The filing deadline to submit 2017 tax returns is Tuesday, April 17, 2018, rather than the traditional April 15 date. If you file extension on April 17, 2018, you have an automatic 6 month extension to file your income tax return for 2017 on October 15, 2018. When you file extension, don’t forget to pay the estimate tax. Any unpaid tax will be charged the penalty and interested until you pay in full.

If you are a nonresident alien and earn wages subject to U.S. income tax withholding, your 2017 U.S. income tax return (Form 1040NR or Form 1040NR-EZ) is due by: April 17, 2018. If you don’t earn wages subject to U.S. income tax withholding, your return is due by: June 15, 2018. If you are a U.S. citizen or resident; and on the due date of your return that you are living outside the United States and Puerto Rico, and your main place of business or post of duty is outside the United States and Puerto Rico; or b. You are in military or naval service on duty outside the United States and Puerto Rico, you are allowed an automatic 2-month extension without filing form 4868 (until June 15, 2018). However, if you pay the tax due after the regular due date (April 17, 2018) interest will be charged from that date until the date the tax is paid. If you served in a

Partnership and S corporation income tax returns are due on March 15 and C corporation income tax return are due on April 17, 2018. You may request an automatic 6-month extension of time to file the return by filing Form 7004 by the due date. When you file form 7004, deposit what you estimate you owe in tax. Then, file the return before 6 month extension to pay any tax, interest and penalty due.

Refunds and pay tax in 2018
Choosing e-file and direct deposit for refunds remains the fastest and safest way to file an accurate income tax return and receive a refund. However, the IRS does not accept some of efile, such as apply ITIN with individual tax return.

The IRS still anticipates issuing more than nine out of 10 refunds in less than 21 days, but there are some important factors to keep in mind for taxpayers.

The quickest, easiest way to make a tax payment is through efiling or paying online from IRS website. If you prefer to pay in cash, the IRS offers a way for you to pay your taxes at a participating retail store. It generally takes five to seven business days to process your payment. Be sure to plan ahead of your due date to ensure your payment is posted timely.

If you can’t pay the full amount due with your return, you may ask to make monthly installment payments. You may be able to apply online for a payment agreement if you owe federal tax, interest, and penalties after you file your tax return.

Individual Tax Identification number (ITIN):

IRS is taking vital steps to strengthen and protect the integrity of the process for issuing the individual taxpayer identification number (ITIN). ITINs are used by people who have tax-filing or payment obligations under U.S. law but are not eligible for a Social Security number. In addition, any ITIN with middle digits of 70, 71, 72 and 80 was expired on December 31, 2017. Any ITIN with middle digits of 78 or 79 was expired on January 1, 2017. Currently, a complete and accurate renewal application can be processed in as little as seven weeks. But this timeframe is expected to expand to as much as 11 weeks during tax season, which runs from mid-January through April. If you don’t need to file your tax return, you don’t need to renew your ITIN. However, timely file a renew for you, your spouse or dependents’ ITIN to avoid a delay in processing your tax return. We are Certified Acceptance Agents (CAA) and we are able to help to apply or renew ITIN for you with right documents to IRS.

Affordable Care Act (ACA) Tax Provisions:

The law requires you and your dependents to have health care coverage, an exemption, or make a payment with your return.  If you purchased coverage from the Health Insurance Marketplace, you may be eligible for the premium tax credit. See ACA topics later. You may receive one or more forms relating to health care coverage you had last year. New Forms are 1095-A Health Insurance Marketplace Statement, 1095-B Health Coverage, and 1095-C Employer-Provided Health Insurance Offer and Coverage which may affect your individual income tax return. If you are expecting to receive a Form 1095-A, you should wait to file your 2017 income tax return until you receive that form.  We will update ACA change or affect  under new TCJA on our website later.

2017 Tax Law Highlight or Changes

There will be some additional tax relief for those affected by Hurricane Harvey, Irma, or Maria, and tax relief for those affected by other 2017 disasters, such as the California wildfires.

Standard Deduction: The standard amount you can deduct from income if you don’t itemize your deductions is $6,350 ($12,700 for married couples filing jointly, or $9,350 if you file as head of household). If you are age 65 or older on the last day of the year and don’t itemize deductions, you are entitled to a higher standard deduction. Therefore, you can take a higher standard deduction for 2017 if you were born before January 2, 1953. If you are blind on the last day of the year and you don’t itemize deductions, you are entitled to a higher standard deduction.

Under TCJA, in 2018, the standard amount you can deduct from income if you don’t itemize your deductions is $12,000 ($24,000 for married couples filing jointly, or $18,000 if you file as head of household).

Itemized Deduction

You should itemize deductions if your total deductions are more than the standard deduction amount. Also, you should itemize if you don’t qualify for the standard deduction. You should first figure your itemized deductions and compare that amount to your standard deduction to make sure you are using the method that gives you the greater benefit. You may be subject to a limit on some of your itemized deductions if your adjusted gross income is more than $261,500 if single; $287,650 if head of household; $313,800 if married filing jointly or qualifying widow(er); or $156,900 if married filing separately.

Under TCJA in 2018, many itemized deductions eliminated, limited or modified

  • Medical expenses remain deductible. For 2017 and 2018, medical expenses are deductible to the extent they exceed 7.5% of AGI. In 2019, the threshold will increase to 10% of AGI.
  • State and local income taxes (SALT) or state and local sales tax, plus real property taxes, may be deducted, but only up to a combined total limit of $10,000 ($5,000 married file separately)
  • Home mortgage interest:
    • Interest on a home equity loan is no longer deductible
    • Interest on a new home mortgage is limited to interest paid on a maximum of $750,000 ($375,000 married file separately) of a new mortgage taken out after December 14, 2017.
    • Taxpayers with a mortgage taken out before December 15, 2017 can continue to claim home mortgage interest on up to $1 million ($500,000 if married file separately) going forward; the $1 million ($500,000 if MFS) limit continues to apply to a refinanced mortgage incurred before December 15, 2017.
  • Charitable contributions: The deduction for charitable contributions is expanded so that taxpayers may contribute up to 60% of their adjusted gross income in 2018, rather than up to 50% in 2017.
  • Gambling losses remain deductible, but only to the extent of gambling winnings. The definition of losses from wagering transactions is modified.
  • Miscellaneous itemized deductions subject to the 2-percent floor in 2017, but will fully eliminated in 2018
    • Employee business expenses; Tax preparation fees; Investment interest expenses
  • Personal casualty and theft losses deduction in 2017 but fully eliminated in 2018, except for certain losses in certain federally declared disaster areas.

In TCJA, the limit on some of your itemized deductions if your adjusted gross income is more than certain amount is eliminated. Most of changes to itemized deductions will remain in place through 2025. In 2026, itemized deductions will generally follow the rules in place before the TCJA.

Personal exemptions

The personal exemption for 2017 is $4,050, remaining the same from 2016. Each exemption for yourself, your spouse (if you file jointly), and your dependents reduces your taxable income by $4,050. There is no marriage penalty relief because the standard deduction for married taxpayers filing jointly increases and the 15% of tax bracket expands. Exemption phaseout. You lose at least part of the benefit of your exemptions if your adjusted gross income is more than a certain amount. For 2017, this amount is $156,900 for a married individual filing a separate return; $261,500 for a single individual; $287,650 for a head of household; and $313,800 for married individuals filing jointly or a qualifying widow(er).

Personal and dependent exemptions are eliminated under new TCJA from 2018 to 2025. In, 2016, taxpayers can claim personal and dependent exemptions again.

Tax Withholding and Estimated Tax: When you figure how much income tax you want withheld from your pay and when you figure your estimated tax, consider tax law changes effective in 2018. For more information, see Pub. 505, Tax Withholding and Estimated Tax. Estimated tax safe harbor for higher income taxpayers. If your 2017 adjusted gross income was more than $150,000 ($75,000 if you are married filing a separate return), you must pay the smaller of 90% of your expected tax for 2018 or 110% of the tax shown on your 2017 return to avoid an estimated tax penalty. Estimate tax payment schedule are April 17, June 15, September 17, 2018 and January 15, 2019. For Corporation, move the 4th estimate tax to December 17, 2017. If Corporation is fiscal year, estimate tax payment schedule are due by the 15th day of the of 4th, 6th, 9th and 12th month of fiscal year.

Tax brackets and Tax rates change in 2018

Under TCJA, individual income tax rates is 10%, 12%, 22%, 24%, 32%, 35%, 37%. In 2017, tax rate is still remain on 10%, 12%, 22%, 24%, 32%, 35%, 37%

Under TCJA, it lowers the corporate income tax rate permanently to 21%, starting in 2018. Also eliminates the corporate alternative minimum tax and increase the section 179 expensing cap from $500,000 to 1 million.

Capital Gain Tax Rate: For long-term capital gain, the 2017 tax year they’re 0%, 15% and 20%. It will remain the same for 2018, but the thresholds have changed. For the short-term capital gain, it tax as ordinary income which are

  • For the 2017 tax year, it’s 10%, 15%, 25%, 28%, 33%, 35%, 39.6%.
  • For the 2018 tax year, it’s 10%, 12%, 22%, 24%, 32%, 35%, 37%.

Some investors may also owe the net investment income tax, an additional 3.8% that applies to whichever is smaller: your net investment income or the amount by which your modified adjusted gross income exceeds the amounts listed below. Here are the income thresholds that might make investors subject to this additional tax:

Some of capital gain tax rule remain the same under TCJA in 2018 for capital gains tax and there are several steps you can take to lower your tax burden

Exclude home sales gain

The IRS has a provision that can help homeowners avoid capital gains on home sales, since this is one of the biggest investments most people make.  If you meet those rules to qualify your home for your main residence, you can exclude up to $250,000 in gains from a home sale if you’re single and up to $500,000 if you’re married filing jointly.

Rebalance with dividends

Dividends are payments you receive for owning stocks or similar investments. They may be taxed similarly to capital gains, depending on whether they’re qualified or nonqualified. Qualified dividends are from investments held for a certain amount of time and are taxed like long-term capital gains. Nonqualified dividends are taxed like short-term capital gains at the investor’s ordinary income tax rate.

Use tax advantage accounts

These include 401(k) plans, individual retirement accounts and 529 college savings accounts, in which the investments grow tax-free or tax-deferred. That means you don’t have to pay capital gains tax if you sell investments within these accounts.

Carry loss over

If your net capital loss exceeds the limit you can deduct for the year, the IRS allows you to carry the excess into the next year, deducting it on that year’s return.

Alternative Minimum Tax: For tax year 2017, the Alternative Minimum Tax Exemption amounts increased to $84,500 for married filing jointly or qualifying widow(er) status, $54,300 for single and head of household status, $42,250 for a married filing separately. In addition, nonrefundable credits are allowed against AMT. AMT tax brackets:  For 2017, the 28% tax rate applies to the first $187,000 ($93,900 if married filing separately) of taxable excess. Under current law, AMT exemptions phase out at 25cents pr dollar earned once taxpayer AMTI hits a certain threshold. In 2017, the exemption will start phasing out at $120,700 in AMTI for single filer, $160,900 for married taxpayers filing jointly and $80,450 for married filing separately, Estates and Trusts.

Earned income credit:  If you have no children, your maximum Earned Income Credit for 2017 is $510. With two children, the maximum amount is $5,616, and with one child, it is $3,400. If you have three or more qualifying children, the maximum Credit you can receive for 2017 is $6,318.

Social Security Wage Ceiling: The maximum amount of your earned income on which you pay Social Security tax is $127,200 for 2017 and the limit is $118,500 for 2016. When you reach that amount with one employer, they should stop withholding Social Security tax from your pay until the following year. If you work for more than one employer, and your total earnings are more than $127,200, we will calculate a credit for any overpayment of Social Security taxes for you. Also, from 2013, individuals will with earned income of more than $200,000 ($250,000 for married couples filing jointly) pay an additional 0.9 percent in Medicare taxes. The maximum amount of your earned income on which you pay Social Security tax is $128,400 for 2018.

Transit and transportation fringe benefit: If your employer provides a benefit for transit passes and transportation in a commuter highway vehicle (such as a vanpool), your maximum tax-free benefit is $255 per month for qualified parking or some qualified bicycle commuting reimbursement of expenses.

Foreign earned income exclusion: If you qualify, you can exclude up to $102,100 of your foreign earned income from your taxable income for 2017. If you and your spouse both work in a foreign country and meet the qualifications, you may each be able to exclude up to $102,100.

American opportunity credit and Lifetime Learning Credit: The American Opportunity Tax Credit expanded on the Hope Credit. The income limits are higher, the credit is available for more qualified expenses, and you can use the credit for four years of post-secondary education instead of just two. Taxpayers will receive a tax credit based on 100 percent of the first $2,000, plus 25 percent of the next $2,000, paid during the taxable year for tuition, fees and course materials. In addition, you can even get a refund if you don’t owe any tax for up to 40% of the credit ($1,000). Generally, a taxpayer whose modified adjusted gross income is $90,000 or less ($180,000 or less for joint filers) can claim the credit for the qualified expenses of an eligible student. The credit is reduced if a taxpayer’s modified adjusted gross income exceeds those amounts. A taxpayer whose modified adjusted gross income is greater than $90,000 ($180,000 for joint filers) cannot claim the credit. For Lifetime Learning Credit, Taxpayers will receive a tax credit up to $2,000, calculated as 20% of the first $10,000 in qualifying educational expense. Generally, a taxpayer whose modified adjusted gross income is $56,000 or less ($112,000 or less for joint filers) can claim the credit for the qualified expenses of an eligible student.

For 529 Education Savings Plans: Interest on earnings in other plans you can use to save for college, including Coverdell Savings Accounts and 529 Education Savings Plans, is not taxable if you use the money to pay for higher education expenses. College expenses you pay from either of these plans aren’t eligible for the American Opportunity or Lifetime Learning credits. If the college expenses you pay in a particular year exceed the amount available from one of these plans, you are allowed to claim a credit for the excess amount.

Under TCAJ, the 529 plan can distribute up to $10,000 each year for tuition incurred for enrollment or attendance at a public, private or religious elementary or secondary school. The $10,000 limit for elementary and secondary school is applied on a per-student limit.

Child and dependent care credit amounts and Child tax credit: The maximum amount of child and dependent care expenses eligible for the credit is now $3,000 if you have one child, or $6,000 if you have two or more children. These increased amounts are permanent. Child tax credit is at $1,000 per child. You must reduce the maximum credit amount of $1,000 for each child if your modified adjusted gross income (AGI) is more than certain amount by your filing status. The credit is reduced $50 for every $1,000 – or portion of $1,000 – that your modified AGI is more than $75,000 filing as single, HOH or qualifying widow(er), $110,000 married filing jointly or $55,000 married file separately.

Under TCJA, the maximum child tax credit increases from 1,000 to $2,000 per qualifying child. The refundable portion of the credit increases from $1,000 to $1,400. That means taxpayers who don’t owe tax can still claim a credit of up to $1,400. Also, the child tax credit begins to phase out for taxpayers with modified adjusted gross income (MAGI) of over $200,000 or $400,000 (MFJ). In 2026, the child tax credit will change to the rules used in 2017, with a maximum credit of $1,000 per qualifying child, and lower phase-outs.

New credit for non-child dependents available through 2025

The TCJA allows a new $500 nonrefundable credit for dependents who do not qualify for the child tax credit. Taxpayers can claim this credit for children who are too old for the child tax credit, as well as for non-child dependents. In 2026, the credit for non-child dependents will no longer be available.

Kiddie tax rules: The amount of unearned income certain children can have before they pay tax at their parents’ rates has gone up. Children can now have up to $2,100 in unearned income before they are subject to “kiddie tax” rules. Depending on the child’s age and whether he or she is a student, kiddie tax rules may apply to children up to age 23. If the child’s only income is interest and dividend income (including capital gain distributions) and totals less than $10,500, the child’s parent may be able to elect to include that income on the parent’s return rather than file a return for the child.

Home office deduction: Beginning in tax year 2013 (returns filed in 2014), taxpayers may use a simplified option when figuring the deduction for business use of their home.  Note: This simplified option does not change the criteria for who may claim a home office deduction. It merely simplifies the calculation and recordkeeping requirements of the allowable deduction. The simplified option is Standard deduction of $5 per square foot of home used for business (maximum 300 square feet).

Standard mileage rate: For 2017: The standard mileage rates for the use of your car or other vehicle is 53.5 cents per mile for business, 17 cents per mile driven for medical or moving purposes and 14 cents per mile for charitable travel which is the same as 2015. For 2018, the standard mileage rates for the use of your car or other vehicle is 54.5 cents per mile for business, 18 cents per mile driven for medical or moving purposes and 14 cents per mile for charitable travel.

Contribution limits for flexible spending accounts: An employee who chooses to participate can contribute up to $2,600 during the 2017 plan year. For 2018, an employee who chooses to participate can contribute up to $2,650. That’s a $50 increase over 2017. Amounts contributed are not subject to federal income tax, Social Security tax or Medicare tax. If the plan allows, the employer may also contribute to an employee’s FSA.

HSA Contributions

An eligible individual who has not attained age 55 by the end of the taxable year may deduct the

contributions he or she makes to an HSA during 2017 in an amount not to exceed:

 $3,400 for account holders with self-only coverage; or

 $6,750 for account holders with family coverage.

Additional Contributions for Age 55 and Older Account Holders

HSA account holders who attain age 55 before the close of a taxable year are eligible to make an additional contribution. The maximum additional contribution amount is $1,000.

Retirement Plan Contribution Limit: For 2015, 2016, 2017 and 2018, your total contributions to all of your traditional and Roth IRAs cannot be more than $5,500 ($6,500 if you’re age 50 or older), or your taxable compensation for the year, if your compensation was less than this dollar limit. The limit on employee elective deferrals (401(k) ) is: $18,000 ($24,000 if you’re age 50 or older) in 2015 to 2017 (the $18,000 amount may be increased in future years for cost-of-living adjustments). The limit on employee elective deferrals is $18,500 ($24,500 if you’re age 50 or older) in 2018 Contributions an employer can make to an employee’s SEP-IRA cannot exceed the lesser of 25% of the employee’s compensation, or $54,000 for 2017 and $55,000 for 2018. Roth IRA contribution limits and eligibility are based on your modified adjusted gross income (MAGI), depending on tax-filing status. Partial contributions are allowed for certain income ranges.

IRA to charity exclusion: The IRA qualified charitable distribution (QCD) provision has been extended. If you are age 70 ½ or older, this exclusion allows you to make direct distributions from your traditional IRA to a charity without recognizing the distribution as income. (You cannot take a charitable deduction.)

Residential energy credit. For 2017, some of energy efficiency improvement made to primary residence ar expired in December 2016. The remain in effect are solar energy system ( solar water heater and solar panel) and these in effect through December 2021.

Tax implication of the Affordable Care Act (ACA), also known as “Obamacare”:

Penalty for not having health insurance in 2017: You must have minimum essential coverage for health insurance or pay a tax penalty. If you have employer sponsored health insurance, an individual plan you purchase yourself, or insurance through a government program (Medicaid or Medicare), you don’t need to purchase other health insurance. However, insurance only cover vision or dental care, worker’s compensation, coverage for specific diseases or condition or discount plan my not meet the requirements. If you don’t have health insurance in 2017, you will need to pay the penalty on your 2017 tax return (due on 4/18/17). The penalty increase to 2.5% of your annual 2017 household income or $695 per adult and $347.50 per Child (up to $2,085 per household), which is higher. You pay penalty for yourself, your spouse and each of your dependents.

Under TCAJ, Health care penalty eliminated. The penalty for failure to obtain health insurance coverage (the “individual mandate”) will be eliminated beginning in 2019. Taxpayers who did not have coverage in 2017 or 2018 will continue to owe a penalty for those years, unless they qualify for an exemption.

Health Insurance Premium Tax Credit: If individuals or families purchase health insurance through the Health Insurance Marketplace, they may qualify for the new Health Insurance Premium Tax Credit. To qualify for the credit, your household income must fall between 100 percent and 400 percent of the federal poverty line, you may not be claimed as a dependent on any other taxpayer’s return, and (if married), you must file jointly. In the case of spousal abuse or abandonment, this requirement may be waived.

 

Estate tax, Gift tax and General-skipping transfer (GST) tax’s exclusion amount: The federal estate tax will be imposed on estates that exceed $5,430,000 in 2015, $5,450,000 in 2016 and $5,490,000 in 2017. The federal gift tax will be integrated with the estate tax the exclusion amount for 2016 is $5,450,000 and 2017 is $5,490,000. For GST tax, the indexed exclusion amount for 2016 is $5,450,000.  Beginning January 1, 2011, estate of decedents survived by a spouse may elect to pass any of the decedent’s unused exclusion to the surviving spouse. This election is made on a timely filed estate tax return for the decedent with a surviving spouse.

An estate tax return may need to be filed for a decedent who was a nonresident and not a U.S. citizen if the decedent had U.S.-situated assets.

Under TCAJ, from 2018 to 2025, the exemption amount is double from $5.6million to $11.2 million which wil expires on December 31, 2015. The exemption will increase with inflation. More detail about new tax rule will keep update in our website later.

Annual Gift exclusion: The gift tax is a tax on the transfer of property by one individual to another while receiving nothing, or less than full value, in return. The tax applies whether the donor intends the transfer to be a gift or not. The gift tax applies to the transfer by gift of any property. You make a gift if you give property (including money), or the use of or income from property, without expecting to receive something of at least equal value in return. If you sell something at less than its full value or if you make an interest-free or reduced-interest loan, you may be making a gift.

 The annual exclusion from the gift tax for 2013-2017 is $14,000 (you and your spouse can give $28,000 together) to an individual but can give to any number of individuals without touch your lifetime gift tax exemption. It will be $15,000 for 2018 due to inflation.

More new Tax Cut and Jobs Act (TCJA) detail and information will be update.

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What’s New for 2016 Tax Law changes every year. We keep track of the tax law changes to help you get your maximum refund and credit. Here are highlight of changes in 2016 for your reference.

Tax return filing begin date and due date: 2017 tax filing season begins Jan 23 for Nation’s taxpayers and tax returns due April 18. The filing deadline to submit 2016 tax returns is Tuesday, April 18, 2017, rather than the traditional April 15 date. In 2017, April 15 falls on a Saturday, and this would usually move the filing deadline to the following Monday — April 17. However, Emancipation Day — a legal holiday in the District of Columbia — will be observed on that Monday, which pushes the nation’s filing deadline to Tuesday, April 18, 2017. Under the tax law, legal holidays in the District of Columbia affect the filing deadline across the nation.

Refunds in 2017 Choosing e-file and direct deposit for refunds remains the fastest and safest way to file an accurate income tax return and receive a refund. However, the IRS does not accept 1040NR and 1040NR-EZ form electronically, so you cannot prepare and efile these forms.

The IRS still anticipates issuing more than nine out of 10 refunds in less than 21 days, but there are some important factors to keep in mind for taxpayers.

Beginning in 2017, a new law requires the IRS to hold refunds on tax returns claiming the Earned Income Tax Credit or the Additional Child Tax Credit until mid-February. Under the change required by Congress in the Protecting Americans from Tax Hikes (PATH) Act, the IRS must hold the entire refund — even the portion not associated with the EITC and ACTC — until at least Feb. 15. This change helps ensure that taxpayers get the refund they are owed by giving the IRS more time to help detect and prevent fraud.

Individual Tax Identification number (ITIN):

IRS is taking vital steps to strengthen and protect the integrity of the process for issuing the individual taxpayer identification number (ITIN). ITINs are used by people who have tax-filing or payment obligations under U.S. law but are not eligible for a Social Security number. Under a recent change in law, any ITIN not used on a tax return at least once in the past three years will expire on Jan. 1, 2017. In addition, any ITIN with middle digits of either 78 or 79 (9NN-78-NNNN or 9NN-79-NNNN) will also expire on that date.Currently, a complete and accurate renewal application can be processed in as little as seven weeks. But this timeframe is expected to expand to as much as 11 weeks during tax season, which runs from mid-January through April..We are Certified Acceptance Agents (CAA) and we are able to help to apply ITIN for you with right documents to IRS.

Affordable Care Act (ACA) Tax Provisions:

The law requires you and your dependents to have health care coverage, an exemption, or make a payment with your return.  If you purchased coverage from the Health Insurance Marketplace, you may be eligible for the premium tax credit. See ACA topics later. You may receive one or more forms relating to health care coverage you had last year. New Forms are 1095-A Health Insurance Marketplace Statement, 1095-B Health Coverage, and 1095-C Employer-Provided Health Insurance Offer and Coverage which may affect your individual income tax return. If you are expecting to receive a Form 1095-A, you should wait to file your 2016 income tax return until you receive that form.  However, it is not necessary to wait for Forms 1095-B or 1095-C in order to file. (continue…)