Manning, Fulton & Skinner, P.A. (“Manning Fulton”) recently hosted nearly 90 guests at its Executive Speaker Series “Taxes and the Economy: The Tax Cuts and Jobs Act of 2017” that featured an analysis of the recently passed tax bill and its anticipated impact. The event was presented by Manning Fulton’s Corporate and Tax Practices and featured a panel of experts including Bradley S. Wooldridge and Steve Byrd of Manning Fulton and Dr. Michael L. Walden, who is a William Neal Reynolds Distinguished Professor of Economics at North Carolina State University.
“The Tax Cuts and Jobs Act tax reform legislation passed by Congress last month significantly changed the tax landscape for individuals and businesses,” said Steve Byrd, partner at Manning Fulton. “This event was designed to help businesses better understand the changes and to present them with tax planning challenges and opportunities to lower their tax bill for 2018 and future years.”
Wooldridge and Byrd spoke to the specifics of bill, and Walden forecasted the impact of the legislation on North Carolina’s economy and, more broadly, the likely impact on the country’s economy.
“Overall, we saw an increase in economic confidence in 2017, and it is expected to continue this year,” said Dr. Michael L. Walden, William Neal Reynolds Distinguished Professor for Economics at North Carolina State University. “National forecasts predict that the GDP, number of jobs, wages and inflation will all continue to rise in 2018. Here in North Carolina, we are also anticipating continued growth based on projections from the North Carolina State University leading indicator index.”
Taxpayers and businesses alike are likely to need professional guidance in dealing with changes to the existing tax code.
“Successful organizations need to take tax planning very seriously,” said John Fink, VP of Finance at LM Restaurants. “With so many changes made last year to tax legislation, it was wonderful to learn from the experts what the changes really mean and what we need to focus on from a business perspective.”
Panelists discussed the more significant changes, including:
Lower Individual Tax Rates — The legislation creates lower individual income tax brackets of 10%, 12%, 22%, 24%, 32%, 35%, and lowers the top rate from 39.6% to 37%, respectively. (The current rates would be restored in 2026, i.e., 10%, 15%, 25%, 28%, 33%, 35%, and 39.6%, respectively).
Modification of the Alternative Minimum Tax (AMT) — The legislation retains the AMT for individuals but increases the exemption amount to taxpayers with an income of $1 million dollars for married couples and phaseout thresholds so fewer people will pay it. The thresholds will be adjusted for inflation.
Corporate Rates — Corporate tax rate is cut to 21 percent starting January 1, 2018. Corporate AMT is eliminated.
Increase in the Standard Deduction — Beginning in 2018, the standard deduction increases significantly from $12,700 to $24,000 for joint filers, from $9,350 to $18,000 for heads of households, and from $6,350 to $12,000 for singles.
Elimination of Personal Exemptions — Personal exemptions may no longer be claimed.
Child and Dependent Credits — From 2018 through 2025, the reform legislation increases the value of the child tax credit to $2,000 per child under 17 from $1,000. As much as $1,400 of the credit will be refundable, thus allowing recipients to benefit even if they don’t owe taxes. The legislation also expands eligibility for the credit by increasing the phaseout threshold to $400,000 of adjusted gross income for joint filers (up from $110,000 under current law), with a threshold for all other filers set at $200,000. A $500 nonrefundable credit for dependents other than children will be available through 2025.
$10,000 Cap on State and Local Tax Deduction — The legislation will allow individuals to deduct no more than $10,000 of any combination of the following taxes: state and local income taxes, state and local property taxes, and sales taxes.
Limits on Home Mortgage Interest Deduction — The Act reduces the amount of home mortgage indebtedness on which taxpayers may deduct interest to $750,000 for mortgages incurred after December 15, 2017. (The $1 million limitation remains for older debt.) Interest on your principal residence and a second home are deductible. Importantly, however, beginning in 2018, interest on home equity indebtedness is no longer deductible, regardless of when it was incurred.
Medical Expense Deduction — Individuals may continue to deduct medical expenses in 2018 and 2019 if the expenses exceed 7.5% of adjusted gross income. The threshold returns to 10% of adjusted gross income in 2019.
Elimination of Deduction for Unreimbursed Employee Business Expenses — The Act eliminates the deduction for miscellaneous itemized deductions through 2025. Thus deductions (subject to the 2% floor of adjusted gross income) for costs related to the production or collection of income, such as appraisal fees, investment fees, and safety deposit box rent are now non-deductible, and, importantly, expenses related to employment, such as uniforms, professional society dues, computer used for work, and job-hunting expenses also are non-deductible.
Estate and Gift Tax — The lifetime gift and estate tax exemption increased to $11.2 million per individual, doubling the current exemption effective January 1, 2018. This amount is adjusted for inflation.
Pass Through Taxation — Pass-through entity owners that meet certain conditions are eligible for a 20% deduction on their business income. Pass-through owners who file jointly and earn at least $315,000 in business profits are subject to limitations on the deduction.
For more information on changes to the tax reform, Manning Fulton and its full suite of legal services visit manningfulton.com
About Manning Fulton
Manning Fulton was founded in 1955 by Howard Manning and Charles Fulton and is one of the longest-lasting law partnerships in North Carolina. In its nearly seven decades faithfully serving the Triangle and Eastern North Carolina, Manning Fulton has grown with its clients and this remarkable state. Today, 40 attorneys, averaging more than 20 years’ experience in their respective fields, provide the full suite of legal services to businesses and individuals throughout North Carolina. The firm’s attorneys are uniquely committed to first-rate, accessible, no nonsense expertise and the development of a lasting relationship with every client. Put simply, we focus on what matters.