The Bad Things in the New Tax Law

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I’ve spent a lot of time and written a lot of articles praising the Tax Cuts and Jobs Act of 2017. However, there are some real bad things about the new tax law that I have neither mentioned nor have really seen discussed. I think that it would be appropriate to take a moment to point out the items in the new law that are head scratchers to me.

First, we have the decentivization to itemize our deductions. The standard deduction is $12,000 for individuals and $24,000 for those married. Thus, the itemized deductions have changed. The most that you can deduct for property, state, local, and sales taxes is $10,000. The medical deduction has gone back to 7.5 percent of adjusted gross income (AGI), down from 10 percent of AGI. The mortgage interest deduction is only good for property that is $750,000 or less, which is down from $1 million.

Charitable contributions have been raised to 60 percent of AGI, from 50 percent. And Miscellaneous Itemized Deductions, which included unreimbursed employee expenses, tax prep fees, and others have been eliminated.

Remember that itemized deductions were incentives to do certain things like buy a house, give to charity, all pretty much gone for a majority of people.

The Alternative Minimum Tax (AMT) was supposed to be eliminated for individuals. It was eliminated for corporations. For individuals the exemptions have been increased, but AMT is still there. AMT is an alternate calculation of your taxable income that is paid in addition to your ordinary taxes.

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About Craig W. Smalley, EA

Craig Smalley

Craig W. Smalley, MST, EA, has been in practice since 1994. He has been admitted to practice before the IRS as an enrolled agent and has a master's in taxation. He is well-versed in US tax law and US Tax Court cases. He specializes in taxation, entity structuring and restructuring, corporations, partnerships, and individual taxation, as well as representation before the IRS regarding negotiations, audits, and appeals. In his many years of practice, he has been exposed to a variety of businesses and has an excellent knowledge of most industries. He is the CEO and co-founder of CWSEAPA PLLC and Tax Crisis Center LLC; both business have locations in Florida, Delaware, and Nevada. Craig is the current Google small business accounting advisor for the Google Small Business Community. He is a contributor to AccountingWEB and Accounting Today, and has had 12 books published on various topics in taxation. His articles have also been featured in the Chicago Tribune, New York Times, Yahoo Finance, Nasdaq, and several other newspapers, periodicals, and magazines. He has been interviewed and been a featured guest on many radio shows and podcasts. Finally, he is the co-host of Tax Avoidance is Legal, which is a nationally broadcast weekly Internet radio show.

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Jan 13th 2018 15:08

I don’t know that I agree with the S Corp comment of just going to C Corp, still have to factor in the double taxation of income, once at corporate level and another at individual level. This will need case by case analysis to see if it makes sense.

This tax act will offer tax professionals the opportunity to add value to their clients as to how to navigate the changes.

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