September 27, 2018

The Tax Cuts and Jobs Act (TCJA) includes a bevy of important tax changes for individuals and businesses. However, it’s sometimes hard to keep track of which changes are permanent and which are scheduled to expire at the end of 2025 — unless Congress extends them.

Here’s a scorecard to help you keep track of the permanent vs. temporary changes as the tax law currently stands.

Permanent Provisions

Temporary Provisions
These changes take effect for tax years beginning in 2018 unless otherwise noted:

For Individuals

  • No deductions for alimony payments required by post-2019 divorce agreements.
  • No more reversals of Roth IRA conversions.
  • Repeal of the penalty for failure to have “minimum essential coverage” under the Affordable Care Act for months beginning in 2019 and beyond.
  • Tax-free distributions of up to $10,000 annually from Section 529 accounts to cover qualified K-12 school expenses at public, private or religious schools.
  • Elimination of favorable treatment under Section 1031 for exchanges of personal property.
  • No more charitable write-offs for a payment to a college if the payment entitles you to buy tickets to athletic events of the college.

For Businesses 

  • Flat 21% federal income tax rate on corporations.
  • Elimination of the corporate alternative minimum tax (AMT).
  • More-generous rules for first-year Section 179 depreciation write-offs.
  • More-generous depreciation deductions for passenger vehicles used for business (cars, light trucks and light vans).
  • Faster depreciation for some real property and farming machinery and equipment.
  • Expanded eligibility to use cash-method accounting and simplified inventory accounting procedures.
  • Favorable accounting method change for eligible construction companies with long-term contracts.
  • Elimination of favorable treatment under Section 1031 for exchanges of personal property.
  • Reduced or eliminated deductions for business entertainment and some employee fringe benefits.
  • Stricter rules on deducting net operating losses (NOLs).
  • Several provisions affecting S corporations, partnerships, and LLCs treated as partnerships for tax purposes, excluding the new deduction of up to 20% of qualified business income (QBI).
  • Self-created intangible assets no longer treated as capital gains assets. Applies to inventions; models and designs; secret formulas; and certain processes.
  • New three-year holding period rule before long-term capital gains treatment is allowed for partnership carried interests.
  • New $1 million annual limit on compensation deductions for amounts paid to principal executive officers.
  • New requirement, for tax years beginning after Dec. 31, 2021, for specified R&D expenses to be capitalized and amortized over five years, or 15 years if the R&D is conducted outside the United States.
 These changes take effect for tax years beginning in 2018, and expire at the end of 2025, unless otherwise noted:

For Individuals

  • Reduced federal income tax rates.
  • More-favorable alternative minimum tax (AMT) rules.
  • Expanded standard deductions.
  • Increased child tax credit (up to $2,000 per qualifying child, with up to $1,400 that can be refundable), and higher income thresholds for the child credit phaseout.
  • Credit of up to $500 for dependents who aren’t qualifying children.
  • Lower income threshold for itemized medical expense deductions (scheduled to expire at the end of 2018).
  • Elimination of the phaseout rule that can reduce some itemized deductions for higher-income individuals.
  • 60% adjusted-gross-income limit for itemized deductions for cash donations to public charities.
  • Tax-free treatment for forgiven student loans due to death or disability.
  • Increased federal gift and estate tax exemptions ($11.18 million or effectively $22.36 million for married couples for 2018).
  • Deduction for up to 20% of qualified business income (QBI) from pass-through entities for noncorporate owners.
  • Elimination of personal and dependent exemption deductions.
  • Limitations on itemized deductions for home mortgage interest.
  • Limitation on itemized deductions for state and local income and property taxes.
  • Elimination of itemized deductions for miscellaneous expenses.
  • Elimination of itemized deductions and tax-free employer reimbursements for moving expenses (except for certain military personnel).
  • Elimination of itemized deductions for personal casualty and theft losses (except for losses incurred in federally declared disasters).
  • Elimination of itemized deductions for hobby expenses.*
  • Revised kiddie tax rate structure.*
  • Stricter deduction rule for nonwagering expenses incurred by professional gamblers (such as for travel and lodging).
  • Limitation on deducting large business losses recognized by individual taxpayers.

For Businesses 

  • 100% bonus depreciation for qualified business assets (expires after 2022).*
  • Bonus depreciation with declining percentages for 2023 through 2026.*
  • New tax credit for employer-paid family and medical leave for payments made in tax years beginning in 2018 and 2019.*
* Indicates that this provision is not included in the “Protecting Family and Small Business Tax Cuts Act.”

In September, the House Ways and Means Committee introduced the “Protecting Family and Small Business Tax Cuts Act of 2018.” This bill would make the many temporary TCJA provisions permanent. House Republican leaders are expected to have trouble mustering the 216 votes needed to pass the measure. However, even if the measure passes the House, the Senate isn’t expected to take up the legislation before the November elections.

Talk with Your Tax Pro

These lists contain only the most widely applicable TCJA provisions; some changes may not be included. Your tax advisor can provide details about the temporary and permanent TCJA changes that could affect you and your business interests.

© 2018