Porte Brown Logo
Porte Brown Wealth Management
Check us out on BrokerCheck
®

Tax Reform: Which Changes Are Temporary vs. Permanent?

Temporary and Permanent arrow signs pointing in different directionsThe Tax Cuts and Jobs Act (TCJA) includes a bevy of important tax changes for individuals and businesses. However, it's sometimes hard to keep track of which changes are permanent and which are scheduled to expire at the end of 2025 — unless Congress extends them.

Here's a scorecard to help you keep track of the permanent vs. temporary changes as the tax law currently stands.

Area

Restriction

These changes take effect for tax years beginning in 2018 unless otherwise noted:

These changes take effect for tax years beginning in 2018, and expire at the end of 2025, unless otherwise noted:

For Individuals

For Individuals

No deductions for alimony payments required by post-2019 divorce agreements.

Reduced federal income tax rates.

No more reversals of Roth IRA conversions.

More-favorable alternative minimum tax (AMT) rules.

Repeal of the penalty for failure to have "minimum essential coverage" under the Affordable Care Act for months beginning in 2019 and beyond.

Expanded standard deductions.

Tax-free distributions of up to $10,000 annually from Section 529 accounts to cover qualified K-12 school expenses at public, private or religious schools.

Increased child tax credit (up to $2,000 per qualifying child, with up to $1,400 that can be refundable), and higher income thresholds for the child credit phaseout.

Elimination of favorable treatment under Section 1031 for exchanges of personal property.

Credit of up to $500 for dependents who aren't qualifying children.

No more charitable write-offs for a payment to a college if the payment entitles you to buy tickets to athletic events of the college.

Lower income threshold for itemized medical expense deductions (scheduled to expire at the end of 2018).

For Businesses

Elimination of the phaseout rule that can reduce some itemized deductions for higher-income individuals.

Flat 21% federal income tax rate on corporations.

60% adjusted-gross-income limit for itemized deductions for cash donations to public charities.

Elimination of the corporate alternative minimum tax (AMT).

Tax-free treatment for forgiven student loans due to death or disability.

More-generous rules for first-year Section 179 depreciation write-offs.

Increased federal gift and estate tax exemptions ($11.18 million or effectively $22.36 million for married couples for 2018).

Faster depreciation for some real property and farming machinery and equipment.

Deduction for up to 20% of qualified business income (QBI) from pass-through entities for noncorporate owners.

Expanded eligibility to use cash-method accounting and simplified inventory accounting procedures.

Elimination of personal and dependent exemption deductions.

Favorable accounting method change for eligible construction companies with long-term contracts.

Limitations on itemized deductions for home mortgage interest.

Elimination of favorable treatment under Section 1031 for exchanges of personal property.

Limitation on itemized deductions for state and local income and property taxes.

Limitation on itemized deductions for state and local income and property taxes.

Elimination of itemized deductions for miscellaneous expenses.

Stricter rules on deducting net operating losses (NOLs).

Elimination of itemized deductions and tax-free employer reimbursements for moving expenses (except for certain military personnel).

Several provisions affecting S corporations, partnerships, and LLCs treated as partnerships for tax purposes, excluding the new deduction of up to 20% of qualified business income (QBI).

Elimination of itemized deductions for personal casualty and theft losses (except for losses incurred in federally declared disasters).

Self-created intangible assets no longer treated as capital gains assets. Applies to inventions; models and designs; secret formulas; and certain processes.

Elimination of itemized deductions for hobby expenses.*

New three-year holding period rule before long-term capital gains treatment is allowed for partnership carried interests.

Revised kiddie tax rate structure.*

New $1 million annual limit on compensation deductions for amounts paid to principal executive officers.

Stricter deduction rule for nonwagering expenses incurred by professional gamblers (such as for travel and lodging).

New $1 million annual limit on compensation deductions for amounts paid to principal executive officers.

Limitation on deducting large business losses recognized by individual taxpayers.

New requirement, for tax years beginning after Dec. 31, 2021, for specified R&D expenses to be capitalized and amortized over five years, or 15 years if the R&D is conducted outside the United States.

For Businesses

100% bonus depreciation for qualified business assets (expires after 2022).*

Bonus depreciation with declining percentages for 2023 through 2026.*

New tax credit for employer-paid family and medical leave for payments made in tax years beginning in 2018 and 2019.*

Questions?
Let us know how we can help.

* Indicates that this provision is not included in the "Protecting Family and Small Business Tax Cuts Act."

In September, the House Ways and Means Committee introduced the "Protecting Family and Small Business Tax Cuts Act of 2018." This bill would make the many temporary TCJA provisions permanent. House Republican leaders are expected to have trouble mustering the 216 votes needed to pass the measure. However, even if the measure passes the House, the Senate isn't expected to take up the legislation before the November elections.

Talk with Your Tax Pro

These lists contain only the most widely applicable TCJA provisions; some changes may not be included. Your tax advisor can provide details about the temporary and permanent TCJA changes that could affect you and your business interests.

We Help You Get to Your Next Level

Get in touch today and find out how we can help you meet your objectives.

CALL US

You are now leaving the Porte Brown LLC website. PrimeGlobal.net
Porte Brown Newsletter Porte Brown Newsletter