Tax Cuts & Jobs Act Overview
Lowering the corporate tax rate from 35% to 21%.
Increasing the standard deduction from $6,000 to $12,000. If you're married and filing taxes jointly, that's a standard deduction of $24,000; Therefore, many people who used to itemize through Sch-A will no longer need to do so.
Increasing the child tax credit from $1,000 to $2,000, and changing the phase out threshold up to about $400,000. This would allow most Americans to qualify and receive the $2,000 benefit, which will help stimulate the economy.
- Limiting itemized deductions on the Schedule-A. A good way to remember this is through a mnemonic I commonly use to teach, which is “COmMITT this to memory”:
- C – Charity
- Om – Other miscellaneous
- M – Medical
- I – Interest
- T – Tax
- T – Theft & casualty
- Creating a new 20% Qualified Business Income deduction to lower tax rates for owners of certain pass-through entities & sole proprietorships (S-corps/P/s).
How does this affect you, the CPA Exam candidate?
- It will change the REG section of the CPA Exam. The content areas that are most affected on REG will be taxation, which makes up about 80% of the exam. This includes federal taxation of property transactions, of individuals, and also federal taxation of entities, like a C corp, S corp, and partnerships. Estates and trusts will also be changed, or—what I like to call—gifts and stiffs. For example, instead of $14,000, your parents can now legally give you $15,000 a year. Estates have also been doubled to about 11.2 million dollars. These are a few of the changes that candidates can expect to see on the REG section in 2019.
- If you want to avoid those changes, sit for the REG section of the CPA Exam now. The AICPA stated that the new tax changes won’t be tested on the REG section until January 1, 2019. Therefore, we recommend that you sit for REG now, in 2018, before January 2019 hits. Why? Because everything you studied in college, whether it's individual taxes or entities, is going to be on the Regulation section of the CPA Exam all throughout the remainder of this year. You won’t need to learn new material, and the material you’ve already studied thus far won’t be obsolete.
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