Updated January 6th, 2019

TAX REFERENCE GUIDE (tax year 2018 - for use in 2019)

The new tax bill which was signed into law on 12/27/17 (Tax Cut and Job Act - TCJA) will drastically impact your 2018 personal and business tax returns that will be filed in 2019.








Income tax rates
Individual income tax rates were lowered: The new law maintains the 7 tax brackets but with lower rates. The top rate of 39.6% is decreased to 37%. The tax rates are lowered from 10%/15%/25%/28%/33%/35%/39.6%) to 10%/12%/22%/24%/32%/35%/37%.



see table


Maximum Amount

Individuals - Standard deduction

The standard deduction almost doubled for 2018 and will be adjusted for inflation going forward.

The new law increases the standard deduction to $12,000 for single filers (from $6350) and to $24,000 for married filing jointly taxpayers (from $12,700). Given these much higher amounts, a higher percentage of taxpayers will be using the standard deduction rather than itemizing their deductions.


Read more (link) - Filing Married vs Filing Single


$12,000

$24,000

Single

Married - MFJ




Individuals - tax on employee wages

The Federal Insurance Contribution Act (FICA) requires employers to withhold from their employees' paychecks Social Security and Medicare Tax. Wages subject to the Social Security Portion of FICA are limited to the first $128,000. There is no earnings limit for the Medicare portion of FICA.


1/ Social security tax

2/ Medicare tax


Read more (link) - Social Security (English)

Read more (link) - Social Security (French)

Read more (link) - Payroll tax center




1/ 6.2%

2/ 1.45%



of wages

of wages




Individuals - State & Local tax deduction (itemized option)

If the taxpayer itemizes (rather than use the standard deduction), this deduction includes State Income tax + Local income tax + Property tax


$10,000




Individuals - Mortgage Interest deduction (itemized option)

If the taxpayer itemizes (rather than use the standard deduction), this deduction is calculated on the interest paid on a main residence's loan.

The 2018 allowable ceiling is reduced for loans secured in 2018 and after from $1,000,000 (2017)  to $750,000.


based on the first $750,000
of acquisition debt



Individuals - Net investment income tax

Individuals owe an additional 3.8% Medicare tax if they have net investment income and their modified AGI is over the threshold amount of $250,000 for MFJ  / $200,000 for Single

Net Investiment income includes =  interest income, dividends, capital gain and rental income.


3.8%




Individuals - Child & Dependent Care Credit

If you paid someone to care for your child, spouse, or dependent last year, you may be able to claim the Child and Dependent Care Credit.


$3000
per dependent



Individuals - Child Tax Credit

The child tax credit doubles to $2000 for every child in your household who is under 17 (from $1000 per child before). Parents with higher income will be able to take advantage of this credit as the phase out is higher at $400K ($110K before). This will make the child tax credit more valuable and may result in more consideration being given to which party has the right to claim the children on his or her tax return for separate couples.


In addition, there is a new $500 tax credit (New Family Credit) for each dependent who is not a qualifying child (for example an elderly parent).


$2000
per child



Individuals - Education Tax Credit

1/ Lifetime credit - calculated on qualified higher education expenses

2/ American Opportunity credit - calculated on higher education expenses

3/ Student loan interest deduction - calculated on the interest paid on the education loan


1/ $2,000

2/ $2,000

3/ $2,500






Individuals - Earned Income Credit (EIC)

The EIC is a refundable credit for low income earners - with:

1/ Earned income less than $15,270 - for taxpayer (S) with no qualifying child

2/ Earned income less than $40,320  - for taxpayer (S) with 1 qualyfying child

3/ Earned income less than $45,802 - for taxpayer (S) with 2 qualyfying children

4/ Earned income less than $49,194 - for taxpayer (S) with 3 or more qualifying children


up to $6,431
up to 3 children



Individuals - Retirement savings plans (contributions)


1/ 401K

2/ IRA & Roth IRA

3/ SEP


To read more (link) - Retirement savings (English)

To read more (link) - Retirement savings (Francais)


1/ $18,500

2/ $5,500

3/ $55,000 / 25% of compensation

Contribution/year

Contribution/year




Business - Qualified Business Income Deduction

Small businesses can deduct part of their qualified business income before it becomes taxable. This deduction is available to pass-through entities only such as:  sole proprietors, landlords, partnerships, LLC, S-Corporations.


20%
of qualified business income



Business  - Equipment purchased  (§179 deduction)

1/ Business equipment expense - part of the acquisition cost may be deducted in the current year

2/ Business SUV - part of the acquisition cost may be deducted in the current year


1/ $1,000,000


2/ $25,000





Business  - Equipment purchased  (Bonus depreciation)

For qualified property purchased during the current year and placed in service in the current, this special depreciation is available. Qualifying property includes: equipment, computer software, building improvements.


100%




Business  - mileage rate

Instead of deducting the actual expenses of business use of an automobile, a taxpayer can use the standard mileage rate method. The standard mileage rate can be used as a substitute for actual expenses for the following items: depreciation, lease payments, repairs, gas, insurance.


To read more (link): Automobile expenses


54.5 cent
per mile



Business -  loss deduction

A business loss is the amount by which the business expenses exceed the business income. Prior to the new law, business losses could be offset against other personal income (such as wages, interest, dividends, capital gain etc).

With the new law, the deduction of business losses is limited to 80% of the taxable income. The amount of business loss that exceeds $500K for couples and $250K for other filers is not deductible in the current year and carried forward.


80% / $250K (Single)


80% / $500K (Married MFJ)

taxable income



Business  - Self Employment tax

Self-employment tax is a tax consisting of Social Security and Medicare taxes for individuals who work for themselves. It is similar to the Social Security and Medicare taxes withheld from the pay of most wage earners.


To read more (link): deductions for self-employed individuals


15.3%
of self employment income