Tax Cuts and Jobs Act overview

Alerts and notices

Summary

The Tax Cuts and Jobs Act (TCJA) was passed into law at the end of 2017 and affects many individuals and business entities for the 2018 filing season and beyond. The following resources may be useful for you when preparing returns for your clients.

Thomson Reuters Checkpoint

Looking for information beyond help with entering data in the UltraTax CS application? Thomson Reuters Checkpoint has summaries, practice aids, checklists, letters, and more to help you navigate TCJA changes. We recommend beginning with the TCJA Toolkit. If you already subscribe to TCJA materials on Checkpoint, click here.

Highlighted changes

The following is a nonexhaustive list of select TCJA changes. Relevant IRS instructions will be linked for each change once the final instructions are published. UltraTax CS forms and calculations will be updated as instructions are published and forms are approved by the IRS. See the User Bulletins and client diagnostics for details on the status of forms and calculations. 

Changes that affect multiple return types

For individuals, AMT exemption and phase-out amounts increased - IRS Form 6251 Instructions.

For corporations, AMT was repealed for tax years beginning after 12/31/2017. The AMT forms, worksheets, and calculations for C Corporations were removed.

Bonus depreciation increased to 100% and the phase-out now begins in 2023 - IRS Form 4562 Instructions. See Choosing bonus depreciation elections for information on opting out. 

The DPAD was repealed for tax years starting after 12/31/17. The 8903 screen was removed from all 1040 input folders except K1 1065, 1120S, and K1 1041.

The basic exemption and generation-skipping transfers (GST) tax exemptions increased. 

Several areas of the code relating to the foreign tax credit were modified, including the addition of two new categories: Section 951A income and Foreign Branch income. In addition, the TCJA allowed for the IRS to issue further regulations or guidance on this. Final documentation is forthcoming and proposed regulations have been posted to IRS.gov.

Deferred gain on Section 1031 like-kind exchanges is now disallowed for section 1245 property after 12/31/17 - IRS Form 8824 Instructions.

For book purposes and several states (CA, IA, MN, and NH) section 1245 assets can still be disposed of as a like-kind exchange. For steps on how to do this, see Dispose of a section 1245 asset as a like-kind exchange.

The depreciation limit for passenger vehicles placed in service after 12/31/17 increased - IRS Changes to depreciation limits on luxury automobiles

There are changes to both carrybacks and carryovers. 

  • Carrybacks are repealed except for farm losses. Farm losses may only be carried back two years, not five, as in previous years. 
  • Carryovers or carryforwards can continue as long as there is an amount to carry over. Before TCJA, carryforwards were limited to 20 years. 

The changes are effective 12/31/17. Net operating losses that originated before that date can continue to carry back or forward using the pre-TCJA rules and are tracked separately on the Net Operating Loss Worksheet 4 in UltraTax CS.

IRS Publication 536

Individuals, trusts, and estates that have qualified business income, qualified real estate investment trust (REIT) dividends, or qualified publicly traded partnership (PTP) income can qualify for a deduction. The qualified income is calculated in the pass-through entity, while the deduction is taken at the individual, trust, or estate level.

Section 163(j) has been amended to reflect a limitation on the deduction for business interest expense for certain taxpayers in tax years beginning after 2017. Form 8990 is used to calculate the amount of business interest expense you can deduct and the amount to carryforward to the next year. Certain trades or businesses are exempt from filing Form 8990; for more information, see the Form 8990 instructions. You can also visit the following articles for information on filing Form 8990 in UltraTax CS: 

To indicate that a trade or business is exempt, see the following articles:

Technical terminations have been repealed for Partnerships with tax years beginning after December 31, 2017. 

More changes for individual taxpayers

Rollovers from 529 plans are now allowed into 529A ABLE accounts. In addition to the annual gift tax exclusion contribution, ABLE account beneficiaries can now contribute up to the lesser of their compensation or the federal poverty line for a one-person household.

The penalty for individuals without the minimum essential health care coverage was repealed beginning with months after 12/31/2018. This means the penalty will calculate on 2018 tax returns, because coverage was still required through December 2018. The penalty will stop calculating in 2019 and will not appear on 2019 tax returns. 

The following fields on the TPW-ACA screen were removed from UltraTax/1040 and will no longer calculate the individual responsibility payment penalty on the Tax Projection Worksheet for 2019:

  • Transfer information from the Coverage screen
  • Entire family will be covered for 2019 with minimum essential health care coverage
  • Exemption from coverage for 2018 household income below filing threshold
  • Dependent's modified AGI for 2019
  • Detail of individual health care coverage or exemption

The amount of credit per child ($2,000) and the threshold amount ($400,000 for joint filers and $200,000 for all other filing statuses) both increased. Also, a $500 credit is now allowed for each qualifying non-child dependent. UltraTax CS will automatically calculate the credit for other dependents who qualify. There is a new dependent code in the Dependent information field on the 1040 screen for other dependents who do not qualify for the other dependent credit (ODC). The refundable portion of the child tax credit (referred to as the additional child tax credit) increased to $1,400 per child.

Returns prepared for individuals claiming the head of household filing status will now be required to file Form 8867, Paid Preparer’s Due Diligence Checklist. Related input is included on Screen 8867 in the Credits folder.

Recharacterizations can no longer be used on conversion contributions. Roth and Traditional IRA contributions can still be recharacterized. The Recharacterization type codes on the 1099-3 screen for Roth IRA conversion from Traditional and Roth IRA conversion from Qual. Plan have been removed.

Taxpayers may continue to elect to include a child's interest and dividend income on their return. The child will not have to file a return or Form 8615 if the parents make the election. If you include the child’s income on the parents' return, the child’s income will be taxed on the parents' rate, which could be a higher tax rate than if the child filed their own return. The child’s unearned income is now taxed using estates and trust tax rates. In UltraTax CS, Screen 8615Sib and the Parent Return Information section on Screen 8615 have been removed. A new 8615 Line 7 Worksheet is available to show how the tax calculates. You can use the Family Transfer Utility to quickly transfer each parent’s name and Social Security number to each child’s return and include in the Family Button as related clients.

Personal exemption amounts are now zero. The Exemption Worksheet in UltraTax CS has been removed. The Form 1040 Reconciliation Worksheet continues to detail the type and number of dependents needed for nonconforming states.

Plans can now be used to pay for up to $10,000 of K-12 tuition per student.

Standard deduction

The standard deduction increased to $24,000 for married filing joint returns and surviving spouses, $18,000 for head of household, and $12,000 for single and married filing separate returns.

Itemized deduction

The overall limitation on itemized deductions (the Pease limitation) is suspended. The Itemized Deduction Worksheet in UltraTax CS has been removed.

Medical expenses

For 2018, qualifying medical and dental expenses that exceed 7.5% of the taxpayer's AGI can be deducted for both AMT and regular tax purposes. Beginning in 2019, the AGI floor for both AMT and regular tax will increase to 10%.

State and local taxes (SALT)

The deduction, which includes the sum of all state and local income/sales, real estate, and personal property taxes, is now limited to $10,000 ($5,000 for married filing separate).

Mortgage interest

The deduction for home mortgage interest is now limited to interest on up to $750,000 of loan debt ($375,000 for married filing separate). The new limit does not apply to debt incurred before 12/15/17; that limit remains at $1,000,000 ($500.000 for married filing separate).

The deduction for interest on home equity indebtedness is suspended, unless the debt proceeds are used to build or improve a qualifying home. This applies regardless of the date the loan originated.

Charitable contributions

The AGI limit for cash contributions to 50% charities increased from 50% to 60%. Noncash contributions remain subject to the 50% AGI limit.

Casualty and theft losses

Casualty and theft losses are no longer allowed unless they are attributable to a federally declared disaster area.

Moving expenses

Moving expenses can no longer be deducted except for active duty military. Form 3903, Moving Expenses will now calculate for federal return purposes only when the Armed forces move field on the 3903 screen in the 1040 Adjustments folder is marked.

Miscellaneous itemized deductions subject to 2% floor

These are now disallowed. This includes, but is not limited to, unreimbursed employee business expenses, union dues, tax preparation fees and investment expenses. Form 2106 may still be used by taxpayers with specific occupations, certain states, and in coordination with supplemental business expenses. Form 2106-EZ has been eliminated.

The following screens have been moved from the Itemized Deductions folder to the 1040 Adjustments folder: 2106, 2106-2, 8829, Auto, 8910, 8911, 8936, Sale, 8824, 4684B, 4562, InStPY, and 4684PY. Some non-conforming states, such as Alabama, Arkansas, California, Hawaii, Iowa, Minnesota, New York, and Pennsylvania, may still allow these deductions. Therefore, there is a new A-St screen in the Itemized Deductions folder to which certain miscellaneous deductions will proforma.

The assets previously in the Asset tab / Screen 4562 in the Itemized Deductions folder will proforma into the Miscellaneous Asset List located in the Non Calculating folder in UltraTax CS 2018. These assets may be reassigned to their applicable activities if necessary. 

User Bulletins

User bulletins for the initial release of UltraTax CS 2018 provide detailed information about enhancements and changes related to TCJA. The following are the bulletins for the initial release of each product. As updates are released, you can review additional bulletins by choosing Help > Bulletins within UltraTax CS 2018, or by searching within the Help & How-To Center.  

Platform release 18.1.0

1040 release 18.1.0

1120 release 18.1.0

1065 release 18.1.0

1041 release 18.1.0

990 release 18.1.0

Determining affected clients

Did you know that UltraTax CS 2017 has pre-built Data Mining searches available already? They are labeled with "TCJA" in the Data Mining utility. Using these reports, you're able to quickly identify which clients are affected.

Planner CS can help you determine how the TCJA will affect your clients’ tax liability in future years. See the following articles for more information.

IRS Resources

IRS tax reform website

Publication 5307

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