Tax Bill – More Observations on Individual Changes

In the few days remaining to manipulate your 2017 income tax liability, keep in mind the following additional points raised in the tax bill that was just signed by the President (please review my blogs over the past five days to refresh your memory on the other changes):

  • All miscellaneous itemized deductions subject to the 2% AGI floor are no longer deductible after 2017. This changes sunsets on 12/31/2025, and includes meals and entertainment deductions and other business expenses claimed by employees, tax return preparation expenses, investment expenses and moving expenses (excluding armed forces members), among others. Query whether you should accelerate the payment of these expenses into 2017, if permitted under the law currently.
  • The 3% limitation (the so-called “Pease” limitation) also was repealed at least until 2026, when it is reinstated.
  • The AMT was not repealed. Instead the exemptions were increased and the phase-out of exemptions was dramatically increased.
  • The $750,000 limitation on the mortgage interest deduction only applies to new debt incurred after 12/15/2017, and reverts back to $1 million after 2025.
  • Interest on home equity mortgages is not deductible from 2018 – 2025. Can you prepay these debts and roll the balance into a new mortgage under the limit?
  • Personal casualty losses are not deductible from 2018-2025, unless the loss was incurred as a result of a federally-declared disaster.
  • Wagering losses are limited to wagering income.
  • Alimony payments are no longer deductible for divorce decrees, separation agreements and certain modifications entered into after December 31, 2018 (divorcing spouses still have one year to figure things out). The recipient would not have to pay income tax on the payments received.
  • Rollovers from §529 plans to ABLE programs will be permitted from 2018-2025, if the designated beneficiary or a member of the beneficiary’s family owns the account. Rollover amounts in excess of the ABLE limit would be included in gross income.
  • No changes were made to the rules relating to exclusion of gain on the sale of a principal residence (even though changes were proposed in both the House and Senate bills).
  • The feared FIFO rule dictating that income tax basis would be determined on a first-in, first-out basis for sales of stocks and other investments was not adopted. Thank heavens!

More blogs to follow as we decipher this massive piece of tax legislation. Have a Happy New Year!