2018 Depreciation Changes

Here is a reminder of what changes the Tax Cuts and Jobs Act has made to depreciating assets for 2018 federal returns:

100% Bonus Depreciation
100% bonus depreciation may be taken for qualifying new or used property acquired September 28, 2017 – December 31, 2022.

For more information see the following on the IRS website:

• Additional First Year Depreciation Deduction (Bonus) FAQs
• IRS Tax Reform Tip 2018 -57 - New 100-percent depreciation deduction benefits business taxpayers

Depreciation Limits for Autos and Personal Use Property
The yearly limitations for passenger autos placed in service during 2018 are:

• $10,000 for year placed in service
• If bonus depreciation is claimed the first year limit is $18,000
• $16,000 for year 2
• $9,600 for year 3
• $5,760 for year 4 and later

Section 179 Expense
For 2018 the maximum amount that can be taken as a Section 179 expense is $1,000,000 which begins to phase out when total asset purchases reaches $2,500,000 for the year.

The following property now is eligible for Section 179 expensing:

• Qualified improvement property made to a building’s interior with the exception if it is for the enlargement of the building, any elevator or escalator or the internal framework of the building
• Roofs, HVAC, fire protection systems, alarm systems and security systems

Depreciation of Improvements on business property
A new qualified improvement property category has been created which replaces the old qualified leasehold improvement, qualified restaurant and qualified retail improvement property categories.

The new qualified improvement property has a general 15 recovery period. However unless Congress makes a technical correction, qualified improvement property must be depreciated over 39 years and does not qualify for 100% bonus depreciation.

Farm Property Depreciation
Beginning in 2018 the recovery period for machinery and equipment used on a farm is 5 years (it was 7 years).  This does not apply to grain bins, cotton ginning assets, fence or other land improvements.

The Tax Cuts and Jobs Act repealed the requirement to use the 150 percent declining balance method for property used in a framing business (i.e. for 3, 5, 7 or 10 year property).

For more details on the above depreciation changes see IRS Fact Sheet FS-2018-9 - New rules and limitations for depreciation and expensing under the Tax Cuts and Jobs Act on the IRS Tax Reform page of their website.

Visit the CrossLink Tax Resource Center to learn more.

2018 Tax Law Changes that are Directly Reported on Form 1040

October 3, 2018

As a reminder, the Tax Cuts and Jobs Act made a number of changes to provisions that are reported directly on Form 1040 or the new 1040 Schedules 1 - 6. Here are the provisions that will affect most taxpayers:

ACA Penalty for not having Health Insurance
Although not a change want to remind you that the shared responsibility payment (penalty) for not having health insurance still applies for 2018 federal returns.  Therefore if an individual did not have health insurance for all or part of 2018 they will either need to qualify for an exemption and complete Form 8965 or include a penalty amount on Form 1040, Schedule 4, line 61.

The penalty goes away beginning in 2019.

Standard Deduction was increased beginning in 2018 to:

• $12,000 – Single
• $24,000 – Married Filing Joint
• $18,000 – Head of Household

The additional standard deduction for the Aged and Blind still applies.

Exemptions were eliminated. Therefore the exemption boxes for the taxpayer, spouse and dependents were eliminated and the line for totaling the exemptions were removed from 1040.

Child Tax Credit had the following changes:

• Increased the credit to $2,000 per child of which $1,400 is eligible to be refundable. The age limit to qualify for the child tax credit remains at children under the age of 17.
• Child must have a Social Security Number to be eligible for the child tax credit.
• The earned income threshold for the refundable portion of the child tax credit has been lowered to $2,500.

Other Dependent Credit

• Created new $500 nonrefundable other dependent credit for:
• Children that are 17, 18, or students
• Other qualifying dependents
• Qualified children under 17 with an ITIN

Moving Expenses

• The moving expense adjustment to income (Form 1040, Schedule 1, 26) is only allowed for members of the armed forces.
• Moving expense reimbursements may no longer be excluded from income.

Tax Rates 
The tax rates and brackets for 2018 for Single and Married Filing Joint filing status’ are:

Rate	Unmarried Individuals	Married Filing Joint
10%	Up to $9,525	Up to $19,050
12%	$9,526 - $38,700	$19,501 - $77,400
22%	$38,701 - $82,500	$77,401 - $165,000
24%	$82,501 - $157,500	$165,001 - $315,000
32%	$157,501 - $200,000	$315,001 - $400,000
35%	$201,001 - $500,000	$400,001 - $600,000
37%	Over $500,000	Over $600,000

For more information on the above provisions and other provisions in the Tax Cuts and Jobs Act see the following:

• Crosslink Tax Resource Center – Federal Tax Law Changes Included in the Tax Cuts and Jobs Act
• IRS Tax Reform page on IRS website – Latest information on the implementation of the Tax Cuts and Jobs Act