THIRD QUARTER 2018 13 FE ATURE continued on page 14 • The child tax credit for those qualifying children under the age of 17 has been doubled from $1,000 per credit to $2,000. • 529 educational savings plans have been expanded to allow funds in the plan to be used for tuition at elementary and secondary schools. • A sizeable increase in the “kiddie tax.” Unearned income (interest, rents, dividends, capital gains) of a child will now be taxed at estate and trust tax rates. The highest tax rate kicks in at a very low income level of $12,500. • Net operating loss deductions have been modified. For losses in tax years beginning after December 31, 2017, the two-year carryback has been repealed. Future net operating losses will be only 80 percent deductible and usable only going forward, not backward. Now, let’s take a look at the changes that will impact businesses. In general, the law is favorable to business. Some key provisions include: • 15-year depreciation for qualified improvement property (think of this as either leasehold improvements or building improvements). • Increase to $1 million in the ceiling of allowable Section 179 expensing. • An increase to 100 percent for first-year depreciation (“bonus depreciation”) for qualified property. • For passenger automobiles, the maximum amount of allowable depreciation has been substantially increased to: $10,000 for Year 1, $16,000 for Year 2, $9,600 for Year 3 and $5,760 for all years thereafter. This is up from $3,160, $5,100, $3,050 and $1,875, respectively, under the old law. • Entertainment is no longer deductible at all. Under the old law, it was 50 percent deductible. This does not affect business meals. • Business interest expense has been limited to 30 percent of a complex formula. Simplistically, it is 30 percent of the business’ adjusted taxable income. The excess interest that is not deducted is not lost and gets carried forward to future years. Those businesses where the average of the prior three years gross receipts is less than $25 million are exempt. • Alternative Minimum Tax has been eliminated for corporations. • Corporations with overseas, unrepatriated cash from prior earnings will be deemed to have repatriated those earnings and be immediately subjected to a 15.5 percent tax thereon. • And, lastly, the most ballyhooed and misunderstood part of the new law – a deduction for pass-through income that is applicable to sole proprietorships, LLCs, continued from page 12