Early 2018 Tax Updates and Announcements
Several key points of tax information for 2018 have already been released. The first point is that the Social Security Administration announced that there will be a 2% increase in the monthly social security benefit checks starting in January, 2018. The downside is that there will also be an increase in the 2018 monthly Medicare cost that is automatically deducted from your social security check. In some cases, the increase in Medicare insurance cost will pretty much wipe out the 2% increase.
The Social Security Administration also announced that the 2018 earnings limit for wages and earned income subject to the social security (FICA) tax of 6.2% is increasing by $1,500 from $127,200 up to $128,700. There continues to be NO cap on wages and earned income that is subject to the 1.45% Medicare tax.
The 2017 mileage rates for the personal use of your car for business use is 53.5 cents per mile, for medical travel or moving purposes is 17 cents per mile, and charitable volunteer work is 14 cents per mile. The 2018 rates are expected to be released in December, 2017. In accordance with the Internal Revenue Code, the purpose of all mileage deductions must be documented and describe who, what, where, when, and most importantly why the travel took place. In the event of an IRS audit, your travel logs will be your most valuable asset and best piece of evidence.
For gift tax purposes, the annual gift amount for 2017 that you can give to an individual is $14,000. A married couple has the option to “gift split” which allows the spouses to join together in an overall limit of $28,000 to an individual. For 2018, the annual limit for gifts is increasing to $15,000 or $30,000 for a married couple who elects to gift split. Keep in mind that there are special rules that can be used when making gifts for education purposes or medical purposes.
The battle over Obamacare rages on. The IRS is taking the position and making plans that Obamacare will be an issue on the 2017 returns that we will be filing in 2018. The IRS has announced that NO electronically filed 2017 personal income tax return (Form 1040) will be accepted “until the taxpayer indicates whether they had coverage, had an exemption or will make a shared responsibility payment”. The IRS has also stated that “paper returns that do not address the health coverage requirements may be suspended pending the receipt of additional information and any refunds may be delayed”. This is the same position the IRS took for the 2016 tax returns until President Trump stepped in and told them to process the returns regardless. As it stands right now, the 2017 returns will be rejected if the health insurance issue is not addressed on the return. The “minimum” penalty for not having qualifying health insurance for 2017 will be $695 per person and it goes up from there depending on your income. Now we will have to wait and see the outcome of Obamacare and the “repeal and replace” health insurance program.
As a reminder, please keep records documenting your casualty losses from the hurricanes and other natural disasters that have occurred this year. If FEMA has issued a disaster declaration for your area, your casualty loss may receive a preferential tax deduction. I am expecting to see a lot of returns taking advantage of the casualty loss rules but you must have your documentation to substantiate your claim.
We are waiting very patiently on Congress and the White House to release their tax legislation. As soon as it arrives, we will get into it and get information out to you.
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