Florida-based banks are ripe for mergers

Tax Changes

Last December, President Trump signed into law Congress’ tax change package. Most notably, the law includes lower income tax rates, a higher standard deduction and new limits on many itemized deductions. Whether taxpayers benefit from the changes largely depends on where they live, what type of income they earn and other factors such as how much mortgage debt they have. In fact, the big winners from the 500-plus-page tax package could be tax planners and financial strategists who help taxpayers navigate the changes.

What’s New ...

• The top personal income tax rate, which now applies to singles making more than $500,000 or married couples making more than $600,000, has dropped from 39.6% to 37%.
• The new standard deduction is $12,000 for single filers and $24,000 for joint filers, almost double the levels in 2017.
• Federal deductions for state and local taxes are no longer unlimited. Now, only the first $10,000 paid in state and local property, income and sales taxes is deductible.
• Estates worth up to $11 million per person ($22 million for married couples) are now exempt from the estate tax, also known as the death tax. The exemption previously stopped at $5.5 million.
• New homeowners may deduct interest paid on up to $750,000 worth of mortgage debt, down from $1 million under the old tax code. Interest paid on a home equity loan is still deductible, but deductibility now applies only to borrowing for home improvements.
• The limit on charitable deductions has been increased from 50% to 60% of adjusted gross income for people who itemize.
• Families can now use 529 college savings plans to pay for private K-12 schools. The new rules allow families to withdraw up $10,000 a year, per student, tax-free to pay for public, private or religious elementary or secondary school costs.
• The new child tax credit is worth up to $2,000 per child, twice as much as before, and is refundable up to $1,400 even if taxpayers end up not owing taxes. The credit starts to phase out at an adjusted gross income of $200,000 for individuals (vs. $75,000 before) and at $400,000 for married couples (vs. $110,000).
• Fewer households will face the alternative minimum tax, an alternative method of calculating tax liability that’s designed to prevent wealthy taxpayers from benefiting too much from itemized deductions. The new law raises the exemption amount from $84,500 to $109,400 for joint filers and from $54,300 to $70,300 for single filers. Also, the exemption doesn’t begin to phase out until $1 million of income for joint filers (vs. $160,900 under the old rules) and $500,000 for other filers (vs. $120,700).
• The top corporate tax rate has dropped from 35% to 21% on taxable income over $10 million, and the corporate alternative minimum tax has been eliminated.
• Owners of pass-through entities such as sole proprietorships, partnerships and S corporations — the vast majority of small businesses — could be eligible for a new tax deduction. Individuals who have taxable income of less than $157,500 (for single filers) or $315,000 (joint filers) generally may deduct 20% of their pass-through income. The deduction disappears entirely for taxpayers with income of more than $207,000 (for single filers) or $415,000 (joint filers). Owners of engineering and architectural businesses get the full 20% deduction even if their income exceeds those thresholds.

— Amy Martinez

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