San Jose Attorney for Tax Cuts and Jobs Act of 2017

Lawyer Helping Address Issues Related to the TCJA in the San Francisco Bay Area

In December 2017, the U.S. Congress passed a landmark tax reform law known as the Tax Cuts and Jobs Act (TCJA). The changes implemented by this law affected nearly everyone in the United States. It is important for all taxpayers to understand how to avoid unexpected penalties and make use of the available deductions and benefits under this law.

John D. Teter Law Offices provides dedicated tax law services for individual taxpayers and large and small businesses. With more than 30 years of experience and a strong knowledge of tax reform laws, our attorney can help you address your tax issues effectively.

Changes Implemented By the TCJA

The Tax Cuts and Jobs Act of 2017 included thousands of major and minor changes that will continue to affect people in a wide variety of ways. Some of the changes that individual taxpayers will notice include:

• Updated tax brackets - The tax brackets for both single and married taxpayers were adjusted, changing the tax rates and the income thresholds for each bracket. Due to these changes, some taxpayers may be moved into different tax brackets.
• Increased standard deduction and child tax credit - The standard deduction that most taxpayers can take has been increased to $12,000 for single filers or $24,000 for married couples filing jointly. Because of this, many taxpayers may no longer need to itemize deductions. In addition, the Child Tax Credit has been doubled from $1,000 to $2,000 per child, and the income threshold for which this credit can be claimed has been raised to $400,000 for a married couple filing jointly or $200,000 for single taxpayers.
• SALT and home mortgage deductions - For taxpayers who claim itemized deductions for state and local taxes, including property, income, or sales taxes, these deductions are now limited to $10,000. The limit for deductions of mortgage interest in new home purchases has been lowered from $1 million to $750,000.
• Spousal support/alimony - For divorces completed on or after January 1, 2019, spousal support is treated the same as child support, and it is not tax deductible for the payor or taxable for the recipient.

Business owners will also see some significant changes to their taxes under the TCJA, including:

• Corporate taxes - The corporate tax rate, which used to range from 15% to 35%, has been changed to a flat rate of 21%. This rate applies to C corporations.
• Pass-through businesses - Businesses that are considered pass-through entities can now take a 20% deduction on business income. This deduction applies to sole proprietorships, partnerships, LLCs that elect to be taxed as a partnership, and S corporations.
• Business expenses - Deductions for certain types of expenses have been changed. For instance, expenses related to entertainment are no longer deductible, but 50% of the cost of business-related meals can be deducted. The maximum deduction for the cost of depreciable business assets under Section 179 of the Internal Revenue Code has been increased from $500,000 to $1 million. New limits have also been placed on deductions for business interest expenses, although these limits only apply to businesses that have average gross receipts of $25 million or higher.
• Net operating losses (NOL) - A business can no longer carry back net operating losses two years. NOLs can now only be carried forward, and deductions are limited to 80% of a business's taxable income.
• Paid employee leave - A tax credit is available to employers that offer paid family and medical leave to their employees. The credit is a percentage of the wages paid during a leave of up to 12 weeks per year.

Finally, taxpayers who have foreign investments should be aware of changes made by the TCJA:

• Participation exemption - Foreign profits can no longer be deferred until they are repatriated to the United States. Instead, a U.S. corporation that owns at least 10% of a controlled foreign corporation (CFC) can claim an exemption for foreign profits that have already been taxed in another country.
• Intangible income - Certain categories of foreign income, known as Global Intangible Low Tax Income (GILTI) and Foreign Derived Intangible Income (FDII) are now subject to worldwide minimum tax rates.
• Base erosion - To prevent companies from moving profits outside of the United States to avoid taxes, the TCJA implemented a Base Erosion and Anti-Abuse Tax (BEAT) of 10%.

Contact a Silicon Valley Tax Lawyer

If you need help understanding how the TCJA will affect you as an individual taxpayer, business owner, or shareholder, contact John D. Teter Law Offices. Call 408-866-1810 to schedule a consultation.