What the Congress is voting on in a day? Find out here.
Posted on December 19th, 2017
Below are some new rules in a variety of areas that will take place in 2018 if congress votes them in and the president signs them into law. It is all expected to be decided before the Christmas.
• Standard deduction increased. Going from $6,500 for single individuals and married individuals filing separately; $9,550 for heads of household, and $13,000 for married individuals filing jointly to $12,000, $18,000, and $24,000 respectively.
• Personal Exemption suspended. Formally, personal exemption of 4,150 each was allowed for the taxpayer, the taxpayer’s spouse, and any dependents. Now, no exemptions are allowed.
• Lower tax brackets. The tax rates are generally lower and the thresholds higher.
• Kiddie Tax modified. Instead of being added to the parents’ income, the unearned income of dependent minors is now taxed at trust rates.
• Personal casualty loss deduction suspended. A deduction is still allowed in the case of a Federally-declared disaster area.
• Child Tax Credit doubled. The child tax credit in increased from $1,000 to $2,000. The phase-out is increased to $400,000 if MFJ and $200,000 otherwise.
• Limit on State and Local tax deduction. Taxpayer may claim a maximum itemized deduction of $10,000 on the aggregate of all state and local property and income (or sales) taxes.
• Mortgage interest limits. The deduction for interest on home equity indebtedness is eliminated. The limit on acquisition indebtedness is lowered from $1,000,000 to $750,000.
• Alimony deduction eliminated. For separation agreements executed after December 31st, 2018 alimony is not deductible for the payor and is not income to the payee.
• Miscellaneous Itemized Deductions suspended.
• Moving expense reimbursement exclusion suspended.
• Individual mandate repealed. Starting 12/31/2018 there is no penalty for failure to meet minimum health insurance requirements. Net investment and high income taxes remain in place.
• Estate and Gift tax threshold increased. The lifetime exemption is increased from $5,000,000 to $10,000,000
• AMT exemption increased. The AMT exemption is increasing from $86,200 for MFJ and $55,400 single to $109,400 MFJ and $70,300 single.
• New Deduction for Qualified Business Income. 20% deduction on Qualified Business Income (QBI) from sole proprietorships and pass-through entities. Deduction is limited to 50% of W-2 wages or 25% of W-2 wages plus 2.5% of the unadjusted basis of the tangible, depreciable property held for use in the qualified trade or business. This appears to make rental real estate eligible for the deduction.
• QBI Limitation for a Service-Based Business. The 20% QBI deduction for service based income is only allowed for taxpayers with an AGI less than $315,000 MFJ or $157,500 for other fillers. Service-based businesses are defined as the fields of health, law, accounting, actuarial science, performing arts, consulting, athletics, financial services, brokerage services, or any trade or business where the principal asset of such trade or business is the reputation or skill of 1 or more of its employees. Engineering and Architecture are excluded from this limitation.
• Corporate income tax rate is a flat 21%
• AMT repealed
• Section 179 Limit increased to $1,000,000
• Bonus deprecation increased to 100%
• Qualified improvements subject to 15 year straight-line depreciation. A qualified improvement is an improvement to the interior of a nonresidential building that it not related to an elevator, escalator, internal framework of the building, or an enlargement of the structure.
• The deduction for business interest is limited to 30% of taxable income. This provision does not apply to taxpayers with average gross receipts of less than $25,000,000.
• NOL Limitation. For losses occurring after 12/31/2017 the NOL deduction is limited to 80% of taxable income. NOLs may no longer be carryback back, but can be carried forward indefinitely.
• DPAD (a 9% income deduction for manufacturing businesses) repealed
• Like-Kind Exchange limits. Sec.1031 exchanges only allowed on the exchange of real property not held for sale.
• Entertainment deduction repealed. Meals deduction remains in place.
• Exceptions to compensation limit repealed. Formally, stock options, commissions, and performance-based pay were not subject to the $1,000,000 deduction limitation executive compensation. These exclusions have been repealed.
• Cash Method. The gross receipts threshold to use the cash method of accounting is increasing from $5,000,000 to $25,000,000 (of average gross receipts in the previous three years).
• Inventory Accounting. The gross receipt threshold to account for inventory is increasing from $1,000,000 to $25,000,000. Additionally, taxpayers below the threshold do not have to capitalize direct and indirect manufacturing costs.
DIFFERENCES BETWEEN BOOKKEEPING AND ACCOUNTING
Bookkeeping and accounting are two functions which are extremely important for every business organization. In the simplest of terms, bookkeeping is responsible for the recording of financial transactions whereas accounting is responsible for interpreting, classifying, analyzing, reporting, and summarizing the financial data.
Bookkeeping and accounting may appear to be the same profession to an untrained eye. This is because both accounting and bookkeeping deal with financial data, require basic accounting knowledge, and classify and generate reports using the financial transactions. At the same time, both these processes are inherently different and have their own sets of advantages. Read this article to understand the major differences between bookkeeping and accounting.
Bookkeeping vs AccountingA major misconception regarding bookkeeping vs. accounting is that both are considered to be one profession. Though they seem to be very similar, there are some striking differences between the two. To resolve this confusion, we have listed down accounting vs bookkeeping differences here -
Bookkeeping is mainly related to identifying, measuring, and recording, financial transactionsAccounting is the process of summarizing, interpreting, and communicating financial transactions which were classified in the ledger account
Management can't take a decision based on the data provided by bookkeeping Depending on the data provided by the accountants, the management can take critical business decisions
The objective of bookkeeping is to keep the records of all financial transactions proper and systematicThe objective of accounting is to gauge the financial situation and further communicate the information to the relevant authorities
Preparation of Financial Statements
Financial statements are not prepared as a part of this process Financial statements are prepared during the accounting process
Bookkeeping doesn't require any special skill setsAccounting requires special skills due to its analytical and complex nature
The process of bookkeeping does not require any analysis Accounting uses bookkeeping information to analyze and interpret the data and then compiles it into reports
Basically there are two types of bookkeeping - Single entry and double entry bookkeeping The accounting department does preparations of a company's budgets and plans loan proposals
Bookkeepers and Accountants
Bookkeepers are required to be accurate in their work and knowledgeable about financial topics. Bookkeepers work is usually overseen by an accountant.