CAI-NJ Dec. 2018 (w)

The Effects of the 2018

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By Karen Artasanchez, CPA, MST, Wilkin & Guttenplan, P.C.

I n December 2017 the Tax Cuts and Jobs Act was passed, marking the largest overhaul of this country’s tax system since 1986. With this massive piece of legis- lation came changes that will simplify tax filings for some and complicate them for others. A summary of some of the more relevant provisions follows. Individual Tax Provisions Tax rates for all individual taxpayers were reduced. Individuals in the highest tax bracket will now pay tax at a rate of 37%, down from 39.6%. While there were no changes to the preferential tax rate for long-term capital gains and qualified dividends, the rate to be paid depends

upon the regular marginal tax rate to which one is subject. There were also changes to the itemized deduction provisions, the most significant of which is the new cap on the deduction for state and local taxes. Under the new rules, individual taxpayers can only deduct $10,000 of their combined state income and state property taxes. As a result of this change, many taxpayers may be better off claiming the standard deduction, which has essentially been doubled over the pre-law change amounts. Another change impacting individuals relates to ali- mony. Under the new rules, alimony payments are not deductible by the payer and are no longer includible in taxable income by the recipient. CONT I NU E S ON PAGE 50

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