Question

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22. How did the change in tax law under the Tax Cuts and Jobs Act of 2017 impact the treatment of alimony when calculating taxable income?

23. Which personal expenditures are not deductible as itemized deductions under the Tax Cuts and Jobs Act of 2017?

24. Summarize the charitable contribution rules for contributions of property (not cash) to a qualifying charitable organization.

Answer 1

22)

Some of the more major aspects of the Tax Cuts and Jobs Act affecting individual taxpayers are the modification of the standard deduction and changes to certain itemized deductions. The standard deduction is a dollar amount that reduces the amount of income on which you are taxed and varies according to your filing status; there is also an additional standard deduction for individuals who are blind or age 65 or over. Taxpayers can choose to itemize their deductions on Schedule A or utilize the standard deduction. Prior to the Act, the standard deduction for married taxpayers filing jointly was $13,000 ($6,500 for single taxpayers, $9,550 for heads of household). For tax years beginning after December 31, 2017 and before January 1, 2026, the standard deduction has been increased to $24,000 for taxpayers filing jointly ($12,000 for single taxpayers, $18,000 for heads of household).

The increase in the standard deduction does not come without decreases and limitations to other deductions. Taxpayers who itemize their deductions will suffer from the loss of miscellaneous deductions and the limitation of the state and local tax deduction. Under the Act, taxpayers may deduct no more than $10,000 ($5,000 for taxpayers married filing separately) in state and local taxes. This includes sales tax, state and local income tax, and real-estate taxes. Miscellaneous itemized deductions that were subject to the 2% floor are suspended for tax years 2018-2025. This includes deductions for unreimbursed business expenses (such as union dues, travel expenses, and business meals), tax preparation expenses, and other expenses (such as investment advisory fees, safe deposit box rental, and casualty/theft losses).

23)We’ll start with a quick refresher on how tax deductions work. The tax law (both before and after the Act) provides a standard deduction amount that a taxpayer may choose to subtract from adjusted gross income to calculate taxable income. The tax law also designates certain expenses that qualify as “itemized deductions.” If the total of a taxpayer’s itemized deductions exceeds the standard deduction amount, then the taxpayer reduces adjusted gross income by (“claims”) this total. Conversely, if the itemized deduction total is less than the standard deduction amount, then the taxpayer claims the standard deduction.

For taxpayers who itemize, incurring a deductible expense reduces the after-tax cost of that expense. For instance, if a taxpayer who pays tax at a 35% marginal rate incurs a $100 deductible expense, that expense costs only $65 after taxes. Taxpayers who claim the standard deduction, however, get no tax benefit from incurring expenses that qualify as itemized deductions; for them, the $100 expenditure still costs $100 after taxes.

24)If you donate non-cash property valued at over $5,000 to a qualified organization, the following rules apply:

• If the value of the property (other than publicly traded securities) exceeds $5,000, a qualified appraisal of the property must be done.
• You must attach Form 8283 to the tax return to support the charitable deduction, and the donee must sign Part IV of Section B, Form 8283.
• The person who signs for the donee must be an official who is authorized to sign the donee’s tax or information returns, or a person specifically authorized to sign by that official.
• The signature does not represent concurrence with the appraised value of the contributed property.
• A signed acknowledgement represents receipt of the property described on Form 8283 on the date specified on the form. The signature also indicates knowledge of the information reporting requirements on dispositions. A copy of Form 8283 must be given to the donee.