F A M I LY � During 2018 through 2025, the following ch-

anges have been made: - The child (under 17) tax credit is increa- sed to $2,000, and the credit phase-out thresholds are increased. - The refundable portion of the child tax credit for any qualifying child is limited to $1,400. - A $500 credit is available for dependen- ts of the taxpayer who is a U.S. citizen, national or resident.

� Section 529 plans are expanded to include use for K-12 students.

� The Kiddie Tax (dependent unearned income, formerly taxed at the parents’ rate), ends after 2017. That income is now taxed at trust rates. (Good for smaller amounts of income, but not so for those with higher amounts.)

� For divorce decrees granted or changed after 2018, alimony is not deductible, or taxable to the recipient.

With many new tax laws, fil-ing can be confusing. Here is a breakdown of the most per-tinent changes that can help when it comes time to filing.

Call now to schedule your ap-pointment!

INSIDE THIS ISSUE: Family Cover Business Owner 2 - 3 Individual 3 - Back Trusts Back

JA C K S O N V I L L E

P O N T E V E D R A B E A C H

ANNUAL TAX SEASON UPDATEJA N UA R Y 2019

Dear Friends,

2018 is over and we will finally get to see how the Tax Cuts and Jobs Act, passed at the end of 2017, affects each of us. Well, sometime soon we will anyway. We’ve seen the many new forms (and they are very different), but of course the government shutdown will affect when we can start filing. We hope the IRS’ “essential personnel” includes the technicians working on updating the efile system, currently promised to be open on January 28th! That will make the filing season even shorter than usual, so let’s work together to do our best work ever this year.

As always, we’re honored that you’ve trusted us to help you in this important area of your financial life. Most returns will take more time to prepare this year, as the tax code saw the most changes since 1986. Know that we’ll be worrying about the complexities of the new reform for you, and getting you any refund due to you. Taxes are only one of our areas of service though, so let us know if we can help in any other ways.

Mark R. Patrick, CPA Timothy P. Raines, CPA

P A T R I C K & R A I N E S C P A s

2 0 1 7 R U L E S 2 0 1 8 R U L E SE N T E R TA I N I N G C L I E N T S : E N T E R TA I N M E N T E X P E N S E

Entertainment expenses: 50% deductibleSporting, concert, or other events: 50% deductible at face value of ticket

No deduction for entertainment expenses.

Tickets to qualified charitable events:100% deductible

No deduction for entertainment expenses.

M E A L S W I T H B U S I N E S S C O N N E C T I O N W H I L E P E R F O R M I N G S E R V I C E F O R A N E M P L OY E R

Qualified business meal expense with client, vendor, employee, etc.:50% deductible

No change!

E M P L OY E E T R AV E L M E A L SQualified meal expenses:50% deductible

No change!

M E A L S P R O V I D E D F O R E M P L OY E R C O N V E N I E N C E( I . E . O N - P R E M I S E C A F E T E R I A , C O U R T E S Y M E A L S F O R S TA F F )

Expenses are 100% deductible provided meals are excluded from the employees’ gross income as de Minimis fringe benefits.Otherwise:50% deductible

Expenses are 50% deductible until 2025. After 2025: non-deductible

O F F I C E H O L I D AY PA R T I E S A N D C E L E B R AT I O N SExpenses are 100% deductible. No change!

C H A R I TA B L E D O N AT I O N S I N E XC H A N G E F O R P R E F E R E N T I A L S E AT -I N G AT C O L L E G E S P O R T E V E N T S

Amount in excess of value of ticket is allowableWas an itemized deduction on Schedule A.

No charitable deduction is allowed when related to sportingevent tickets.

MISCELLANEOUS ITEMIZED DEDUCTIONSEmployee Business Expenses (Form 2106)including the Office in Home deduction (Form 8829) are Schedule A deductions subject to a reduction of 2% of AGI.

Itemized deductions subject to the 2%of AGI in 2017 have been eliminated (Safe Deposit Box, Investment & Professional Fees, Business Expenses, Union Dues, etc.)

2

changes inbusiness deductionsNew

Tax Law

A N N U A L T A X S E A S O N U P D A T E

3

how the new tax law affects you...B U S I N E S S O W N E R

I N D I V I D U A L

� The Tax Cuts and Jobs Act permanently reduced C-Corporation income tax to a flat rate of 21%.

� Failure to file a partnership or S-Corporation return exposes the part-nership to a $210 per-partner, per-month penalty.

� Under Code Sec. 199A, non-corporate taxpayers may deduct 20% of “qualified business income” (QBI) from a partnership, S corporation, or

sole proprietorship (i.e., the “pass-through” or QBI deduction). There are several limitations, so will require analysis on our part; plan to provide your W2 and W3 forms.

� Business deductions for entertainment expenses are now generally disallowed. (See chart to left) � The Code Sec. 179 expensing limit is $1 million. � The income-based phase-out level for Code Sec. 179 expensing is $2.5 million. � Bonus depreciation is now 100% and available for both new and pre-owned equipment. It must

be new to the taxpayer, therefore, property exchanged in a Sec. 351 transfer of assets or personal assets placed into a sole proprietorship are not eligible for bonus depreciation (but still eligible for Sec. 179).

� Regular (as opposed to bonus first-year) depreciation and expensing limits for autos, trucks and vans placed in service in 2018 and used 100% for business are: - $10,000 for the year in which the vehicle is placed in service, plus $8,000 bonus. - $16,000 for the second year - $9,600 for the third year - $5,760 for the fourth and later years in the recovery period.

� Trade ins of tangible depreciable property can no longer qualify as like kind exchanges. � For 2018, if a business' three-year-average gross receipts are $25M or less, it is exempted from:

- The general limitation on use of the cash method. - Mandatory inventory accounting. - Use of the percentage-of-completion long-term contract method.

� The tax rates dropped and the brackets widened, but there are still seven of them ranging from 10% to 37%.

� The basic standard deduction amounts for 2018 are: $12,000 for single or married filing sepa-rate taxpayers, $24,000 for married filing joint and surviving spouses, and $18,000 for heads of household (HH). Single or HH taxpayers over 65 years or blind can claim an additional deduction of $1,600; married filers can claim $1,300.

� Personal exemptions have been eliminated. � Medical deductions return to a threshold in excess of 7½% of their Adjusted Gross Income (AGI) in

2018 only, then back to 10%. � The annual tax deduction for state and local property, income, etc. taxes (SALT) is limited to $10,000.

-Foreign real property tax may not be deducted, other than taxes paid or accrued in carrying on a trade or business or in an activity for the production or collection of income.

� The deduction for interest on “home equity debt” has been suspended (but interest on a home equity loan used to buy, build or improve a home may be deductible). Interest on new mortgages in excess of $750K is limited.

(Individual continued on back page)

P A T R I C K & R A I N E S C P A s

E M A I L W E B

P H O N E FA X

A D D R E S S BY A P P O I N T M E N T

C O N N E C T W I T H U S

off ice@CPAsite.com www.CPAsite.com

904.396.5400 904.396.9226

4029 Atlantic Blvd.Jacksonville, FL 32207

6000-A Sawgrass Village Cir., Ste. 1Ponte Vedra Beach, FL 32082

(Individual continued)

� The deduction for personal casualty and theft losses is eliminated, except for personal casualty losses incurred in a Federally declared disaster; and non-disaster personal casualty losses to the extent of personal casualty gains.

� Miscellaneous itemized deductions subject to the 2%-of-AGI floor are suspended from 2018 to 2025. - The exclusion for qualified moving expense reimbursements has gone (except for certain me- mbers of the Armed Forces).

� For 2018 through 2025, the basic exclusion amount for gift and estate tax purposes is $11,180,000 per person.

� For 2018, the gift tax exclusion is $15,000 per giver. � For 2018, the minimum failure to file penalty on income tax returns filed more than 60 days late

(unless due to reasonable cause) is the lesser of $210 or the amount of tax required to be shown on the return.

� For persons 70½, if you are required to take an RMD from an IRA, consider using part or all of that amount for a Qualified Charitable Gift. It won’t be part of your gross income and you can still ben-efit from the full standard deduction. The annual limit is $100K per year.

� Roth IRA rollovers cannot be recharacterized back to a traditional IRA. � Forms 1040A and 1040EZ have been eliminated. Beginning in 2019 though, seniors (65 and older)

can use form 1040SR, which will be similar to Form 1040EZ, but not restricted based on income. It can include Social Security benefits, distributions from retirement plans, annuities and other deferred pay arrangements, interest and dividends, and adjusted net capital gain. Does it sound different? It is! View the new 1040 at: https://www.irs.gov/pub/irs-pdf/f1040.pdf.

� The top rate is now 37% instead of 39.6%. � IRS has issued proposed regulations regarding the creation

of multiple trusts for tax avoidance purposes.

T R U S T S

2018 was a year of change … not only for the Internal Revenue Code, but also for us! Two of our long time staff accepted great op-portunities in the private sector, at a client’s office. We took it as a compliment to the cali-ber of our team, but it did cause some service delays for which we apologize. In response, we’ve been building an even stronger team to serve you. In 2018, we added CPA Bar-bara Bellamy and Enrolled Agent Ruqayyah Shabazz. We are continuing to improve in 2019 by introducing our new tax supervisor, Ivanna Aguirre, and our marketing coordi-nator Jaclyn (Jacky) Robertori who will also help out with some administrative customer service tasks. We’re sure you’ll enjoy working with them.

We look forward to working together for a great year ahead!

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