Strategic and proactive tax planning is key to saving taxes. The recent US Tax Reform signed into law by Trump creates new opportunities (and preserves some of the old) to plan and maneuver the tax code.

1. Strategic Planning
After Tax Reform
Thomas Jones
tjones@sweeneyconrad.com
January 5, 2018

2. Topics
Tax Reform Changes
• Individuals
• Businesses
• 20% Pass-Through Deduction
• Business Losses
Timing of Tax Reform Provisions
Key Planning Areas

3. Tax Reform Changes – Individuals
Many of the provisions made for individuals are temporary until the end of 2025. There will be seven
tax brackets for individuals, with the top tax rate being reduced to 37% (down fro 39.6%). The income
thresholds for each bracket has also increased, so now the top tax rate applies to income over
$600,000 for MFJ and $500,000 for Single:
• The standard deduction is doubled to $24,000 for MFJ and $12,000 for Single.
• Alternative Minimum Tax exemption increased to $109,400 for MFJ and $70,300 for Single.
• Personal exemptions are eliminated.
• Adjustment for moving expenses is eliminated.
• The healthcare penalty (individual mandate penalty) is eliminated beginning January 2019.
• The child tax credit is increased to $2,000 (up from $1,000) and the phase out is increased
to $400,000 of AGI for MFJ (up from $110,000).
• Alimony paid deduction and taxability of alimony income is permanently repealed for any
divorce or separation agreement executed after December 31, 2018.

4. Tax Reform Changes – Itemized Deductions
There are several significant changes to itemized deductions:
• The floor for medical expenses is lowered to 7.5% of AGI (from 10%) for 2017 and 2018.
• The deduction for state and local income tax, sales tax, and property taxes is limited to
$10,000.
• Mortgage interest deduction is limited to $750,000 of acquisition debt. The pre-2018 limitation
of $1 million is retained for loans existing prior to December 15, 2017. This still includes your
primary and one additional residence.
• Interest from home equity debt (i.e. home equity lines of credit or HELOCs) is no longer
deductible.
• Miscellaneous itemized deductions subject to the 2% floor are eliminated. This includes
certain investment expenses, professional and tax prep fees, and unreimbursed employee
business expenses.
• The “Pease” itemized deduction phase-out is eliminated.

5. Tax Reform Changes – Businesses
Most of the changes for businesses are permanent. The tax rate for taxable corporations is reduced
to a flat 21% for tax years beginning after December 31, 2017:
• Corporate Alternative Minimum Tax is eliminated.
• Bonus depreciation is increased to 100% for qualified depreciable assets purchased after
September 27, 2017 and through January 1, 2023 (5 years), after which it will begin to be
phased out.
• Section 179 expensing limit is doubled to $1 million.
• Section 1031 like-kind exchanges are repealed for personal property
• Domestic Production Activities Deduction (DPAD) is eliminated for tax years beginning after
December 31, 2017 for non-corporate taxpayers and December 31, 2018 for C-corps.
• The Research & Development credit is retained but research expenses must now be
capitalized and amortized ratably over a five-year period.
• Entertainment expenses are no longer deductible.
• Exceptions that allowed 100% expensing of business meals are repealed.

6. 20% Pass-Through Deduction
There is a new 20% deduction from taxable income which applies to individuals, trusts, and estates
for Qualified Business Income (QBI) from a partnership, S-corporation, or sole proprietorship:
• Deduction is the sum of
• The lessor of
• The “combined QBI amount” (which includes 20% REIT and PTP income) of the taxpayer, or
• 20% of the excess, if any, of the taxable income over the sum of net capital gain and qualified
cooperative dividends
• The lessor of
• 20% of the aggregate amount of the qualified cooperative dividends, or
• Taxable income (reduced by the net capital gain).
• For pass-through entities, the deduction cannot exceed the greater of
• 50% of the W-2 wages with respect to the qualified trade or business, or
• The sum of 25% of the W-2 wages paid plus 2.5% of the unadjusted basis of all “qualified
property.”
• Deduction does not apply to professional service businesses (health, law, consulting, financial).
• Phase-out limits begin at $315,000 for MFJ.

7. Business Losses
There are some new changes related to business losses for individual and corporate taxpayers:
• Excess business losses are limited to $500,000 for MFJ or $250,000 for Single (this is
different for corporations). Such losses are treated as Net Operating Losses (NOL) and
carried forward.
• Net operating losses (NOL) are limited to 80% of taxable income.
• NOLs can no longer be carried back to previous years (except for farming or insurance)
• NOLs can be carried forward indefinitely

8. Timeline of Tax Reform Provisions
2017 2018 2019 2022 2023 2026
BusinessIndividual
• 100% Bonus
Depreciation
• Alimony Changes
• No ACA Penalty
• 7.5% Medical
Floor
• R&D 5 Year
Amortization
• Interest AGI
Limit Change
• DPAD Ends for
C-Corps
• Employer
FMLA Credit
• Employer
Meals End
• 100% Bonus
Depreciation Phase-out
End of Individual Provisions
• Tax rates
• Exemptions
• Standard deduction
• Itemized deductions
• Moving adjustment
• Loss limits
• AMT exemption
• Pass-through deduction
• Child Tax Credit

9. Key Planning Areas
Entity Structuring
• Change to 21% flat corporate tax rate
• 20% pass-through deduction
• Loss or limitation of certain business deductions
Change entity election for LLCs, creation of new entities, shifting of income or
debt to other entities.
Tax reform changes
Planning opportunity
Tax reform changes
Planning opportunity
Estate Planning
• Doubling estate tax exemption until 2026
• Doubling of standard deduction
• Lower tax rates for individuals
Reevaluate current business succession plan, accelerate planned gifts, hire or
contract family members.

10. Key Planning Areas
Assets and Investments
• 100% bonus depreciation
• Limitation on business interest
• Loss of 1031 exchanges (except for real property)
Purchase and financing of business assets, sale of business, shifting of
investment assets
Tax reform changes
Planning opportunity
Tax reform changes
Planning opportunity
Retirement Planning
• Loss of Roth recharacterization lookback
• Lower tax rates for individuals
Retirement contribution planning, timing of Roth conversions, RMD planning.

11. For more information…
Thomas Jones
tjones@sweeneyconrad.com
425-301-1149
January 5, 2018