Continued.. A Guide to the Tax Cuts and Jobs Act Child and Elder Care The Act increases the Child Tax Credit from $1,000 to $2,000. It increases phase out limits from $110,000 to $400,000 for married tax filers. It allows a $500 credit for each non-child dependent. The credit helps families caring for elderly parents. It expands to allow parents to use 529 savings plans for tuition at private and religious K-12 schools. They can also use the funds for expenses for homeschooled students, in addition to the previous college expenses. Business Taxes The Act lowers the maximum corporate tax rate from 35 percent to 21 percent, the lowest since 1939. The United States has one of the highest rates in the world. It creates a standard deduction of 20 percent for passthrough businesses. Pass-through businesses include sole proprietorships, partnerships, limited liability companies, a S corporations. The Act limits corporations’ ability to deduct interest expense to 30 percent of income. For the first four years, income is EBITDA, but reverts to earnings before interest and taxes thereafter. It allows businesses to deduct the cost of most depreciable assets in one year instead of amortizing them over several years. It does not apply to structures, and special rules for vehicles remain. To qualify, the equipment must be purchased after September 27, 2017 and before January 1, 2023. The Act stiffens the requirements on carried interest profits. Carried interest is taxed at 23.8 percent instead of the top 39.6 percent income rate. Firms must hold assets for a year to qualify for the lower rate. The Act extends that requirement to three years. The Act eliminates the corporate AMT. The corporate AMT had a 20 percent tax rate that kicked in if tax credits pushed a firm’s effective tax rate below that level. Under the AMT, companies could not deduct research and development spending or investments in low-income neighborhoods. 7 Kenneth R. Diel, CPA, CVA Kerber, Eck & Braeckel, LLP At Kerber, Eck & Braeckel, it is our job to make sure that you have the knowledge you need to comply with the ever-changing rules and laws affecting you and your business. We are here to answer questions and offer advice about your specific situation. Advising HBA Members for Over 30 Years! 618-632-7574 It retains tax credits for electric vehicles and wind farms. The Act doubles the base estate and gift exemption amount from $5 million to $10 million. The $10 million amount is indexed for inflation occurring after 2011 and is expected to be approximately $11.2 million in 2018 (422.4 million per married couple).
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