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Summary of the Reconciled and signed Tax Cuts and Jobs Act


Summary of the Reconciled and signed Tax Cuts and Jobs Act

This summary does not address every provision of the recently passed tax reform legislation, however, we have included those provisions likely to affect the most individuals and small businesses. Please contact us if you have specific questions that are not answered by this summary.

Individual Tax Reforms

Most reports estimate that approximately 80% of taxpayers will see a reduced tax burden in 2018. A large increase in the standard deduction, as well as an increased child tax credit provide the greatest relief to taxpayers, even for many who currently itemize. The other 20% will see some type of tax increase, the magnitude of which will depend on many factors. Some common factors that could contribute to a higher tax bill in 2018 are:
o Families with more than two (2) children, as the tax reform bill has been designed around a family of four (4).
o Purchasing a new home with a mortgage in excess of $750k after December 15, 2017
o Taxpayers incurring home equity debt after December 15, 2017
o Resident of a high property tax state or county
o Resident of a state with higher income tax rates
o Taxpayers with significant unreimbursed job-related expenses, broker fees, or investment interest expense.
There are many other factors that may contribute to a higher tax bill in 2018, but these are the items likely to affect the most taxpayers.

Adjusted Tax Brackets and Rates

Married filing joint and surviving spouses (Divide threshold by 2 for married filing separately)
Old rate structure
Income Threshold

0 – 10%

18,650 – 15%

75,900 – 25%

153,100 – 28%

233,350 – 33%

416,700 – 35%

470,700 – 39.6%

New rate structure
Income Threshold

0 – 10%
19,050 – 12%

77,400 – 22%

165,000 – 24%

315,000 – 32%

400,000 – 35%

600,000 – 37%

Head of Household
Old rate structure
Income Threshold

0 – 10%
13,350 – 15%

50,800 – 25%

131,200 – 28%

212,500 – 33%

416,700 – 35%

444,500 – 39.6%

New rate structure
Income Threshold

0 – 10%
13,600 – 12%

51,800 – 22%

82,500 – 24%

157,000 – 32%

200,000 – 35%

500,000 – 37%

Individuals filing Single

Old rate structure
Income Threshold

0 – 10%
9,325 – 15%

37,950 – 25%

91,900 – 28%

191,650 – 33%

416,400 – 35%

418,400 – 39.6%

New rate structure
Income Threshold

0 – 10%
9,525 – 12%

38,700 – 22%

82,500 – 24%

157,500 – 32%

200,000 – 35%

500,000 – 37%

Estates and Trusts

Old rate structure
Income Threshold

0 – 15%

2,550 – 25%

5,950 – 28%

9,050 – 33%

12,400 – 39.6%

New rate structure
Income Threshold

0 – 10%

2,550 – 24%

9,150 – 35%

12,500 – 37%

Adjusted Standard Deductions
Filing Status

Single and Married Filing Separate


Old – 6,350

New – 12,000

Married Filing Joint


Old – 12,700

New – 24,000

Head of Household

Old – 9,350

New – 18,000

Changes to Individual Deductions and Credits

• The following items have not been affected and will continue as they are, including all applicable limitations, phaseouts, and sunsetting provisions.
o Student Loan Interest Deduction
o Credit for Plug-in Electric Drive Vehicles
o No Changes to the Earned Income Tax Credit
o American Opportunity and Lifetime Learning Credits
o Tuition and Fees Deduction
o Grad Student Tuition Reduction still excluded from income
o Exclusion of Savings bond interest used for higher education expenses
o Employer Educational Assistance program payments remain non-taxable
o Deduction for out of Pocket educator expenses
o Exclusion of gain from sale of personal residence
• Excess business losses convert to NOL
o Excess Passive activity and farming losses will carryforward as NOL to future tax years.
• No Deduction for alimony payments
o The deduction of alimony payments will be eliminated beginning 1/1/2019.
o Recipients of alimony will no longer include alimony received as income
• No deduction for moving expenses
o The deduction for moving expenses has been discontinued for all but active duty members of the armed forces.
• 529 Education Savings account Changes
o Taxpayers may now distribute up to $10k per year per account to fund elementary or secondary education in addition to qualified college expenses.

Changes to Schedule A, Itemized Deductions

o Overall Limitation of Itemized Deductions
 The Overall Limitation has been eliminated.
o Medical Expense deduction threshold
 The threshold has been decreased from 10% to 7.5%
o State and Local income or sales tax and property taxes
 There is now an aggregate limit of $10,000 on schedule A deductible taxes.
o Home Mortgage Interest Deduction
 Deduction allowed on up to $750k of acquisition indebtedness
 No deduction allowed for home equity indebtedness
o Charitable Deduction changes
 The income percentage limitation has been increased from 50% to 60%
 Rights to purchase seats for athletic events are not deductible
o Personal Casualty Losses
 Only deductible to the extent caused by a declared federal emergency
o Miscellaneous Itemized deductions subject to 2% limitation
 ALL of these items have been suspended and will not be deductible in 2018.
• Personal Exemptions have been eliminated
• Increase to Child Tax Credit
o The Child tax credit has been increased to $2,000, $1,400 of which is refundable. There is also an additional $500 credit for non-child dependents.
o The Phaseout thresholds have been increased to $400k for joint filers, and $200k for all other filers.

ACA Shared Responsibility Payment

Also known as the individual mandate, this has been repealed, and there will no longer be a penalty for not having qualified health insurance coverage.

Business Tax Reform

Corporate Tax Rate
The corporate tax rate will be a flat 21%.

Flow Through Entities

Certain pass-through businesses will be allowed the lesser of 20% of qualified business income or 50% of gross wages, on the owners’ personal Forms 1040. Joint filers below $315,000 and other filers below $157,000 can claim the full deduction. This provision would expire December 31, 2025. Please contact us if you have questions regarding your individual circumstances.

Accounting Method Simplification

• Eligibility for cash accounting method
o A corporation or partnership may now use the cash method of accounting if their 3-year average of gross receipts does not exceed $25,000,000. This also applies to entities engaged in Farming.
• Capitalization of costs to inventory
o Corporations and partnerships will also be exempt from the inventory capitalization rules of 263A if they are under the gross receipts threshold above. For individuals, each activity in which they are involved shall be treated as its own “entity” for the purpose of calculating the gross receipts threshold.
• Percentage completion for long term contracts
o Corporations and partnerships will also be exempt from the requirement to use the percentage completion method for long term contracts if they are under the gross receipts threshold above. For individuals, each activity in which they are involved shall be treated as its own “entity” for the purpose of calculating the gross receipts threshold.

Changes to Depreciation and Fixed Asset Accounting for Tax Purposes

• Section 179 Deduction
o The total Section 179 deduction limit has been increased to $1,000,000, and the placed-in-service limitation increased from $2,000,000 to $2,500,000. Qualified Real Property now specifically includes the following items for non-residential real property
 Roofs
 Heating, Ventilation, & Air Conditioning
 Fire Protection and Alarm Systems
 Security Systems
• Bonus Depreciation
o Bonus depreciation will be increased from 50% to 100% for tax years 2018-2022.
o Bonus depreciation will be 80% for tax year 2023.
o Bonus depreciation will be 60% for tax year 2024.
o Bonus depreciation will be 40% for tax year 2025.
o Bonus depreciation will be 20% for tax year 2026.
 These rates apply to new and used personal property, as well as plants bearing fruits and nuts. Lesser percentages may be elected by the taxpayer for specified tax years.
• Changes to qualified property
o The following categories of assets have been eliminated:
 Qualified leasehold improvements
 Qualified Restaurant Improvements
 Qualified Retail Improvement Property
• Research and Development Expenses – Beginning Tax Year 2022
o Research and Development costs must be capitalized and amortized over 5 years, 15 years for foreign R&D expenses. No Deduction shall be allowed for any such capitalized expenses that are disposed, retired, or abandoned.
• Certain Self-Created Property not treated as a capital asset
o Patents, inventions, Models or designs, secret formulas or processes are to be treated as ordinary income items if sold.
• Like-Kind-Exchanges
o Section 1031 will no longer apply to personal property, only real property.
• Depreciation Limitations on Passenger Autos

Year in Service:


Old – 2,560

New – 10,000


Old – 4,100

New – 16,000


Old – 2,450

New – 9,600


Old – 1,475

New – 5,760

Changes to Depreciation for Farms
• Depreciable Life and Depreciation Methods
o Any Machinery and Equipment used in farming (excluding grain bins, cotton ginning assets, fencing, or other land improvements) may be depreciated over 5 years.
o Farms are no longer required to use the 150% Declining Balance method to depreciate personal property.

Changes to Other Business Related Exclusions and Deductions
• Limitation of Business interest deduction
o Business interest may be deducted, but is limited to 30% of adjusted taxable income (Taxable income before deducting any interest. Disallowed interest may carry forward to the following year indefinitely.
o Businesses meeting the $25,000,000 gross receipts test mentioned previously are exempt and have no limitation.
o Indebtedness incurred by a business used to finance the acquisition of motor vehicles for sale or lease is excluded.
• Net Operating Loss Deductions
o Net Operating Losses shall no longer be carried backward. However, they may now be carried forward indefinitely.
o Net operating loss deduction shall be limited to 80% of taxable income for a given year.
o Farm Exclusion: Farms will still be eligible for the 2-year carryback period.
o Insurance Company Exclusion: Insurance Companies, other than life insurance, will be eligible for the 2-year carryback, but be limited to a 20 year carryforward. These companies are not subject to the 80% income limitation.
• Domestic Production Activities Deduction
o The Domestic Production Activities Deduction has been eliminated.
• Limitations on deductions for certain Fringe Benefits
o No deduction shall be allowed for entertainment provided to employees.
o No deduction shall be allowed for transportation and commuting benefits provided to employees.
o No Deduction shall be allowed for meals provided to employees for the convenience of the employer.
• Deductions for local lobbying expenses
o These expenses are no longer deductible
• Employee Achievement Awards
o Non-Taxable employee achievement awards may not include Cash, Gift Cards, or other non-tangible personal property such as vacations, lodging, theater or sporting event tickets, stocks, bonds, securities, or other similar items.

Business Taxes and Credits
• Rehabilitation Credit
o Limited to certified historical structures
• Employer Credit for Paid Family and Medical Leave
o 12.5% of amounts paid for family and medical leave.
 This percentage increases by .25% for each percentage of compensation paid above 50%
 Applies to 12 weeks of total leave per employee

• Excise tax on Beer
o For Large Producers: Tax decreased from $18 to $16/barrel for the first 6,000,000 barrels
o For Small Producers: Tax decreased from $7 to $3.50/barrel for the first 60,000 barrels.
• Excise tax on Wine
o Alcohol Content threshold for lowest excise tax tier has increased from 14% to 16%.
o Excise Tax credits are now available to wine producers and importers of all sizes.
• Excise Tax on Distilled Spirits
o Excise tax on first 100,000 proof gallons lowered to $2.70 from $13.50.

Alternative Minimum Tax

There is no longer a minimum tax calculation for corporations. If you have questions regarding the minimum tax for individual taxpayers please contact us.

Taxability of Contributions of Capital from Governmental/civic organizations

The following must be treated as revenues, rather than as a contribution to capital. (1) any contribution in aid of construction or any other contribution as a customer or potential customer, and (2) any contribution by any governmental entity or civic group (other than a contribution made by a shareholder as such)

Technical Termination of Partnerships

Partnerships will no longer automatically terminate so long as any business, financial operation, or venture of the partnership continues to be carried on by any of its partners in a partnership.

Reduction in Corporate Dividends Received Deduction

The amount of dividends allowed to be excluded from income has been decreased to coincide with a lower corporate income tax rate. If you have questions regarding this section, please contact us for an individualized consult.

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Senior Property Tax Homestead Exemption


A property tax exemption is available to qualifying senior citizens and the surviving spouses of seniors who previously qualified.  The three basic requirements are:  1) the qualifying senior must be at least 65 years old on January 1 of the year of the application; 2) he or she must be the owner of record and must have been the owner of record for at least ten consecutive years prior to January 1; and 3) the senior must have occupied it for at least ten consecutive years prior to January 1.

For those who qualify, 50 percent of the first $200,000 of actual value of the applicant’s primary residence is exempt.  The state will reimburse the county treasurer for the lost revenue.

Here is a link to the form to apply:   senior-property-tax-exemption-long-form

For more information, please contact our office.

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Smart Regs – Boulder Rentals


All licensed rental housing in Boulder must pass a Smart Regs inspection before December 31, 2018. If your property is not currently licensed, it will need to be prior to the inspection.
– Smart Regs are a new baseline energy efficiency requirements for existing rental housing in Boulder. Improving energy efficiency in existing rental housing enhances tenant comfort and supports the community’s energy goals and climate commitment.

What is EnergySmart?

The EnergySmart Service, developed by the City of Boulder and Boulder County, provides a SmartRegs Compliance Pathway for owners and property managers. Designed to eliminate hassle, EnergySmart will provide:

Owners and property managers with a comprehensive, one-stop-shop for energy efficiency solutions;
A free, dedicated energy advisor to assist with determining where individual properties stand in relation to SmartRegs compliance, and to recommend the best method of compliance for each individual rental property; and
Direct installation of free energy efficiency measures, help scheduling contractors for any efficiency improvements that need to be made, and assistance identifying and applying for eligible rebates and incentives.
Contact EnergySmart at or call 303-544-1001 to speak with an energy advisor.

What happens if I don’t comply by Dec. 31, 2018?

The rental license for all licensed rental properties that do not pass a SmartRegs inspection before the end of 2018 will expire on Dec. 31, 2018. Additionally, until the property reaches SmartRegs compliance, you will not be able to receive or renew a rental license at the start of 2019 and beyond. The discovery of an unlicensed rental property will result in legal action.

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New Penalties for Failing to Timely File Information Returns


If you fail to file a correct information return (1099, 1098, W2-G to name a few)  by the due date and you cannot show reasonable cause, you may be subject to a penalty.  The penalty applies if you:

– Fail to file timely

-Fail to include all information required to be shown on a return

-Include incorrect information on a return

-File on paper when you were required to file electronically

-Report an incorrect TIN

-Fail to report a TIN

-Fail to file paper forms that are machine readable


The amount of penalty is based on when you file the correct information return.  The penalty is as follows:

-$50 per information return if you correctly file within 30 days (by March 30 if due date is February 28 *see calendar showing 1099-MISC with box 7 information now due January 31, 2017); maximum penalty $532,000 per year ($186,000 for small businesses)

-$100 per information return if you correctly file more than 30 days after the due date but by August 1; maximum penalty $1,596,000 per year ($532,000 for small businesses)

-$260 per information return if you file after August 1 or you do not file required information returns; maximum penalty $3,193,000 per year ($1,064,000 for small businesses)


For further information, including exceptions to the penalty, please see General Instructions for Certain Information Returns at



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New Penalties for Failing to Timely File W3 and W2 Forms


The 2016 W3 and W2 forms are due to employees and the government by January 31, 2017. Failure to file a correct form W2 by the due date without showing reasonable cause, may result in penalties as provided under IRS Section 6721.  The penalty applies if you:


-Fail to file timely.

-Fail to include all information required to be shown on Form W2,

-Include incorrect information on Form W2

-File on paper forms when you are required to e-file

-Report an incorrect TIN

-Fail to report a TIN

-Fail to file paper Forms W2 that are machine readable.

The amount of penalty is based on when you file the correct Form W2.  The penalty amounts below apply for tax years beginning in 2016.  The penalty is:


-$50 per Form W2 if you correctly file withing 30 days of the due date (February 28 if the due date is January 31); the maximum penalty is $532,000 per year ($186,000 for small businesses)

-$100 per Form W2 if you correctly file more than 30 days after the due date but by August 1; the maximum penalty is $1,596,500 per year ($532,000 for small businesses)

-$260 per Form W2 if you file after August 1, do not file corrections, or do not file required Forms W2; the maximum penalty is $3,193,000 per year ($1,064,000 for small businesses)


For further information, including exceptions to the penalty, please go to the General Instructions for Forms W2 and W3 at

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We have been receiving many questions and concerns from clients regarding the recent rash of IRS scams. These scam artists present themselves as being from the IRS, a tax company and sometimes even a state revenue department. They are doing this via email as well as by phone. By email, they’re trying to entice people to click on links in official-looking messages containing questions related to their “tax refund”. Report these emails to By phone, many are using threats to intimidate and bully people into paying a “tax bill”. They even alter caller ID numbers to make it look like the IRS or another agency is calling. The callers use fake names and fake badge numbers as well. Below are some tips to help keep you safe.


• Call to demand immediate payment over the phone, nor will the agency call about taxes owed without first having mailed you a bill.
• Threaten to immediately bring in local police or other law-enforcement groups to have you arrested for not paying.
• Demand that you pay taxes without giving you the opportunity to question or appeal the amount they say you owe.
• Require you to use a specific payment method for your taxes, such as a prepaid debit card.
• Ask for credit or debit card numbers over the phone.

• Do not give out any information. Hang up immediately.
• Contact TIGTA to report the call. Use their “IRS Impersonation Scam Reporting” webpage or call 1- 800-366-4484.
• Report it to the Federal Trade Commission. Use the “FTC Complaint Assistant” on Please add “IRS Telephone Scam” in the notes.
• If you think you might owe taxes, call the IRS directly at 1-800-829-1040.


Never reply to emails, texts or pop-up messages asking for your personal, tax or financial information. One common trick is to impersonate a business such as your financial institution, tax software provider or the IRS, asking you to update your account and providing a link. For small business, these schemes may try impersonating a company leader and request payroll and human resource information for employees. Never click on links even if they seem to be from organizations your trust. Go directly to the organization’s website.


• Don’t reply to the message.
• Don’t give out your personal or financial information.
• Forward the email to Then delete it.
• Don’t open any attachments or click on any links. They may have malicious code that will infect your computer.

More information on how to report phishing or phone scams is available on

If you think you’ve been a victim of one of these scams, please follow the steps provided. You may also contact us at with any questions.

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New Safe Harbor Limits


The Internal Revenue Service recently simplified the paperwork and record keeping requirements for small businesses by raising from $500 to $2,500 the safe harbor threshold for deducting certain capital items.

The change affects businesses that do not maintain an applicable financial statement (audited financial statement). It applies to amounts spent to
acquire, produce or improve tangible property that would normally qualify as a capital item.

The new $2,500 threshold applies to any such item substantiated by an invoice. As a result, small businesses will be able to immediately deduct many
expenditures that would otherwise need to be spread over a period of years through annual depreciation deductions.

“We received many thoughtful comments from taxpayers, their representatives and the professional tax community, said IRS Commissioner John Koskinen. “This
important step simplifies taxes for small businesses, easing the recordkeeping and paperwork burden on small business owners and their tax preparers.“
Responding to a February comment request, the IRS received more than 150 letters from businesses and their representatives suggesting an increase in the
threshold. Commenters noted that the existing $500 threshold was too low to effectively reduce administrative burden on small business. Moreover, the cost
of many commonly expensed items such as tablet-style personal computers, smart phones, and machinery and equipment parts typically surpass the $500

As before, businesses can still claim otherwise deductible repair and maintenance costs, even if they exceed the $2,500 threshold.
The new $2,500 threshold takes effect starting with tax year 2016. In addition, the IRS will provide audit protection to eligible businesses by not
challenging use of the new $2,500 threshold in tax years prior to 2016.

For taxpayers with an applicable financial statement, the de minimis or small-dollar threshold remains $5,000.

Further details on this change can be found in Notice 2015-82, posted today on

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The Tax Increase Prevention Act of 2014


This bill was signed by the President on December 19, 2014. It amends the Internal Revenue Code of 1986 to provide for the tax treatment of ABLE accounts established under State programs for the care of family members with disabilities, and for other purposes. Read more here.

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Taxpayer Bill of Rights


The IRS has adopted a Taxpayer Bill of Rights, as proposed by the National Taxpayer Advocate, to make taxpayer rights clear, understandable and accessible for the taxpayer. Learn more about these rights here. As always, don’t hesitate to contact us via phone or email with any questions.

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