Did you know that only 50% of taxpayers pay income taxes? That won’t change with the new tax laws. However, there is good news for those 50% that do pay.
As we were preparing 2017 tax returns this year, our tax software provided a comparison of what our client’s 2017 income will look like under the 2018 tax law. For those we serve – the majority found their tax liability would go down. However, it depends on your specific circumstances.
Here are the situations in which taxpayers lose-
- For those reporting itemized employees expenses – they will lose them in 2018
- For businesses that claim high entertainment expenses – they will lose the 50% tax deduction this year.
- For those who pay more than $10,000 in state taxes -you will only be allowed to claim up to $10,000 of real estate and state income taxes as itemized deductions.
Here are situations in which taxpayers will win –
- Those who qualify for the 20% pass through business deduction. If you report business income on your personal income tax return, you may be able to reduce your taxable income by 20% of your business income. The calculation is complicated and each situation has different facts.
- Lower tax rates for those that were in the 15% bracket up. The new rates range from 10% to 37%.
- Fewer will pay Alternative Minimum Tax (AMT). They changed the rules.
Areas that still need clarification –
- A clearer definition as to what is a “service business”.
- For rental property income will this be treated as business income.?
- Are the meals associated with entertainment still 50% tax deductible?
If you want to know more about your specific situation, we offer tax-planning meetings. Call our office, 920-351-4842 to learn more or schedule your appointment.
By Mary Guldan-Lindstrom