- Estate Tax: The final law ultimately preserves the estate tax but doubles the current exemptions of $5.49 million for individuals and $10.98 million for married couples. Raising the statutory threshold will reduce the number of farms and family businesses subject to the tax. It will also spare many family-run businesses from jumping over accounting hurdles to avoid the tax altogether.
- State and Local Taxes (SALT): The tax law includes a significantly downsized, itemized deduction for up to $10,000 of state and local property taxes. This provision – which eliminates the unlimited, longstanding deduction for state, sales and local property taxes – may pose challenges for AHC members who file returns in high-tax states next year.
- Mortgage Interest: The new law reduces the current $1 million cap on mortgage interest to $750,000, which the Internal Revenue Service (IRS) will apply to homes purchased after Jan. 1.
- Charitable Contributions: In cases of individual cash contributions, the final law increases the percentage-limit deduction from the current rate of 50 percent of the donor’s adjusted gross income (AGI) to 60 percent of AGI.
Now the Real Work Begins
Tax policy experts predict that the fast-moving tax law will result in a lengthy bill in 2018 to address technical corrections to clarify ambiguous provisions. The IRS will also begin a year-long process of promulgating regulations to implement the new law. The AHC recommends that members consult their accountants or other tax professionals to begin assessing the new tax landscape for 2018 and beyond.
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