In Notice 2018-61, the IRS and Treasury Department stated that they intend to issue Regulations clarifying which items estates and non-grantor trusts will still be able to deduct. Under the Tax Cuts & Jobs Act "TCJA," miscellaneous itemized deductions subject to the 2% of adjusted gross income floor have been suspended and can no longer be deducted in individual income tax returns.
Under the Tax Cuts and Jobs Act, the exclusion amount for taxable estates has doubled to $10 million indexed for inflation for 2018 through 2025. With this high exclusion amount, it is anticipated that few estates will be subject to the Federal estate tax. Perhaps it’s time to shift your thinking from the traditional approach of reducing the amount of a taxable estate to building basis.
Will I benefit from the Tax Cuts and Jobs Act? Good question! The sweeping tax reform that was passed into legislation last year became effective January 1, 2018. Among the changes made by the law, that impacts virtually every taxpayer, were the repeal of the personal exemption, increase in the standard deduction, modification to itemized deductions and doubling of the child tax credit.
As we near the end of tax filing season, you might be looking to increase the number of itemized deductions you can use to offset highly taxed ordinary income. What about the grab bag of expenses known as miscellaneous expenses? If you qualify, you might be able to deduct a portion of those expenses on your 2016 tax return.
Are you entitled to personal and dependency exemptions on your tax return? It might be the last year you can claim the exemption for someone—say, a child graduating from college—or exemptions may be eliminated altogether by tax reforms that could be coming in conjunction with proposed rate cuts. At the very least, however, the exemptions are still available on 2016 returns.