joseph castellano

(All individual tax changes expire on December 31, 2025)

(Final regulations to be issued by United States Treasury Department)


  Current Tax Law New Tax Law
Personal tax rates
Seven tax brackets: 10%, 15%, 25%, 28%, 33%, 35%, 39.6%
Seven tax brackets: 10%, 12%, 22%, 24%, 32%, 35%, 37%;

35% bracket starts at $200,000 (single)/$400,000 (married) of taxable income and 37% bracket starts at $500,000 (single)/$600,000 (married)

Personal long-term capital gains and qualified dividend tax rate Up to 23.8% Unchanged
Passthrough income Taxed at ordinary income tax rate up to 39.6% Taxed at ordinary rate with a potential deduction equal to the lesser of 20% of qualifying business income or 50% of wages paid; deduction is limited for service-oriented business
Standard deduction Married filing jointly: $12,700
Head of household: $9,350
Single: $6,350
Married filing jointly: $24,000
Head of household: $18,000
All others: $12,000

Personal exemption




Head of Household (HOH) filing status Due diligence required to claim HOH status; $500 preparer penalty for noncompliance
Penalty will be adjusted for inflation  
Child tax credit
$1,000 per child, partially refundable; only dependent children qualify; credit begins to phase out when Adjusted Gross Income (AGI) exceeds $75,000 (single)/$110,000 (married)
$2,000 per child, refundable  up to $1,400 per child; $500 for non-child dependents; phase outs begin when AGI exceeds $200,000 (single)/$400,000 (married); child must have SS # to be eligible for credit
Personal state income tax, sales tax, and property tax Allowable in full as itemized deductions
Combined deduction for property tax, income tax and sales tax limited to $10,000




  Current Tax Law New Tax Law
Mortgage interest Interest deductible on up to  $1 million of mortgage debt (including second residence); home equity interest deductible on up to $100,000 loan balance
Interest deductible on up to $750,000 of mortgage debt (including second residence); no deduction for home equity interest; $750,000 limit effective for debt incurred after 12/15/17
Medical expenses Deductible to the extent they exceed 10% of AGI Deductible to the extent they exceed 10% of AGI (7.5% of AGI for 2017 and 2018)
Miscellaneous itemized deductions (such as unreimbursed employee job expenses, tax preparation fees, investment expenses, gambling losses and hobby expenses) Allowable as an itemized deductions if deductions exceed 2% of AGI All 2% itemized deductions are eliminated

Cash charitable contributions


Allowed up to 50% of AGI Allowed up to 60% of AGI
Investment interest expense Allowed as an itemized deduction up to amount of net investment income Final bill was silent on this; deduction is presumed to still be allowed
Itemized deduction phaseout Certain itemized deductions phased out for taxpayers with high income (Pease limitation) Pease limitation repealed
Alternative Minimum Tax (AMT) Supplemental tax imposed on taxpayers whose taxable income, adjusted by disallowing certain deductions, exceed certain exemption amounts Unchanged, but limitations on state and local tax deductions in addition to higher exemption and phaseout  amounts will subject fewer taxpayers to the AMT

AMT exemption amounts


$54,300 single

$84,500 MFJ

$42,250 MFS

$24,100 trusts and estates

$70,300 single

$109,400 MFJ

$54,700 MFS

$24,100 trusts/estates

AMT exemption phaseouts AMT exemption reduced by 25% when Alternative Minimum Taxable Income (AMTI) exceeds:

$120,700 single

$160,900 MFJ

$80,450 MFS

$75,000 trusts/estates


AMT exemption reduced by 25% when AMTI exceeds:

$500,000 single

$1 million MFJ

$500,000 MFS

$75,000 trusts/estates





  Current Tax Law New Tax Law
IRA recharacterizations Individual allowed the recharacterize IRA contribution from regular IRA to Roth IRA or vice-versa before the due date of the 1040; both regular IRA contributions and Roth IRA conversions are allowed to be recharacterized Roth conversions cannot be recharacterized
Deductible to payor; taxable to recipient
Not deductible to payor and not taxable to recipient for decrees executed or modified after 12/31/18
Individual health insurance mandate Individuals penalized for failure to carry minimum essential health insurance coverage Repealed
Exclusion of gain on sale of principal residence Can exclude up to $250,000/$500,000 of gain on sale of principal residence if used as principal residence for 2 out of the previous 5 years Unchanged
1031 exchanges Allowed for almost any type of like-kind property used in a trade or business or held for investment purposes Only allowed for real estate not held primarily for sale
Amounts paid for college athletic seating rights Taxpayer may treat 80% of donation to college as charitable deduction even if they received tickets/seating rights in return No charitable deduction allowed for any donation in which tickets or seating rights are received in return
529 plans Distributions may only be used for qualified higher-education expenses Distributions allowed for tuition at elementary or secondary public, private or religious schools up to $10,000
Income from equity grants Income from equity grants transferred to an employee in connection with the performance of services is generally recognized when the stock vests Employee may elect to defer income from stock options exercised or RSUs settled for up to five years




  Current Tax Law New Tax Law
Estate tax, gift tax and generation skipping tax (GST) Maximum tax rate of 40%; lifetime exemption of $5.49 million per individual; heirs receive stepped-up basis for inherited assets Lifetime exemption increases to $11.2 million for 2018 and will increase for inflation each year until 2025; maximum tax rate remains at 40%; step-up in basis retained

Annual gift tax exclusion


$14,000 $15,000





  Current Tax Law New Tax Law

Maximum C-corporation tax rate


35% 21%
Corporate AMT rate 20% Repealed after 2017; AMT credits refundable from 2018 through 2021
Section 179 depreciation deduction Up to $510,000 for new and used equipment purchases; deduction reduced when total equipment purchases in a single year exceed $2.03 million Up to $1 million for new and used equipment purchases; deduction reduced when total equipment purchases in a single year exceed $2.5 million
Bonus depreciation 50% expensing of the cost of new equipment and qualified assets 100% expensing of the cost of new and usedequipment and qualified assets for assets purchased after 9/27/17
Depreciation of real estate Non-residential real estate depreciated over 39 years and residential real estate depreciated over 27.5 years Unchanged
Net operating losses (NOL)
Generally carried back 2 years and forward 20 years
Carryback repealed except for farms (two years); indefinite carryover deduction limited to 80% of pre-NOL income for losses generated after 2017
Excess business loss No provision Net businesses losses in excess of $500,000 ($250,000 single) are disallowed in the current tax year and become a NOL carried over to the next year
Business interest paid or accrued

Generally deductible in full

Business interest deduction limited to 30% of adjusted taxable income; limitation determined at the entity level; excess deduction carried forward indefinitely; limitation does not apply to businesses with average three-year gross receipts < $25 million




  Current Tax Law New Tax Law
Cash method of accounting

Generally limited to businesses with less than

$5 million of average three-year gross receipts ($1 million for farms)

Gross receipts threshold increased to $25 million of average three-year gross receipts
Accounting for inventories Businesses must generally use the accrual method if inventories are present, unless average three-year gross receipts are < $1 million Businesses with less than $25 million of gross receipts are not required to account for inventories; inventories may be treated as non-incidental materials and supplies or accounted for in conformity with businesses’ financial accounting treatment of inventories
Income recognition Amount included in income (cash or accrual) is determined without regards to when it is included in income for financial accounting purposes Taxpayer must recognize income no later than the tax year when it is recognized as income in an Applicable Financial Statement (AFS) or other financial statement specified by the IRS in § 451(b); does not apply to taxpayer that does not have a financial statement under

§ 451(b)(1)(B)(i)

UNICAP rules – § 263A Businesses with < $10 million of average three-year gross receipts do not have to add certain manufacturing costs to inventory or basis of certain property produced under

§ 263A

Gross receipts threshold increased to $25 million; exceptions to § 263A not based on gross receipts are retained (i.e. R&E expenses, long-term contracts, etc.)
Accounting for long-term contracts Construction companies can opt out of the percentage-of -completion method (PCM) if average three-year gross receipts < $10 million Taxpayers can opt out of PCM if the contact is expected to be completed in under two years AND average three-year gross receipts are < $25 million at the time the contact is entered into




  Current Tax Law New Tax Law
Partnership technical termination A partnership is technically terminated under § 708(b)(1)(B) if there is a sale or exchange of more than 50% of the total interest in partnership capital and profits within a 12-month period 50% technical termination rule of § 708(b)(1)(B) is repealed; a partnership will still technically terminate if the partnership ceases to carry on any business activity § 708(b)(1)
Domestic production activities deduction (DPAD) Domestic producers eligible for a deduction equal to the lesser of 9% of their qualifying income or 50% of wages paid Repealed after 2017
Meals and entertainment expenses Deduction allowed for 50% of business-related meals and entertainment expenses Deduction disallowed for entertainment expenses.

Beginning after 2025 disallows expenses associated with meals provided for convenience of employer

Electing Small Business Trust (ESBT) Nonresident alien may not be a beneficiary of an ESBT Nonresident alien restriction repealed
Carried interest Carried interest to fund managers is taxed at capital gains rate  

3-year holding period required for long-term capital gain rate



Intangible property Self-created intangible assets (patents, designs, secret formulas, etc.) are taxable as capital gains when sold Taxed as ordinary income.
Executive compensation Publicly traded covered employee compensation limited to $1M per year, not including commissions, performance-based compensation, retirement plan contributions and excludable amounts from gross income. Exceptions for commissions and performance-based compensation are repealed. Covered employees include CEO, CFO and the three highest paid officers.
Nonprofit executive compensation No excise tax imposed on nonprofit executive compensation 21% excise tax imposed on nonprofit executive compensation over $1 million
Research or experimentation expenses Deduct currently capitalize and recover over the useful life of research but not less than 60 months or elect to recover over 10 years R&E after 2021 must be capitalized and amortized ratably over a 5 year period.  15 years if conducted outside the US.
Sexual harassment claims subject to nondisclosure agreement Generally deductible along with legal fees Amounts incurred after 12/27/17 for claim on fees are not deductible
Rehabilitation credit 20% credit for qualified rehabilitation expenditures for certified historic structure.

10% credit on pre – ‘36 buildings

10% credit to pre – ’36 buildings is repealed.

20% credit can be claimed ratably over a 5 year period

New credit for employer paid family and medical leave No credit For years beginning after 12/31/2017, but not beginning after 12/31/19, allows businesses to claim a general business credit equal to 12.5% qualifying wages
Dividend-received deduction If a corporation owns 20% of stock, an 80% DRD is allowed; otherwise 70% 80% reduced to 65%

70% reduced to 50%

Exclusions from contributions of capital Contributions of capital is not incurred in income If property is acquired by a corporation and is not contributed by a shareholder as such the adjusted basis of the property is zero if cash must reduce the basis.



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