DEA Meeting: Thomas O. Bailey, CPA

Marcello Guercini introduced Jack van Wunnik with Thomas O. Bailey, CPA.  Jack spent years in the business world before becomming a CPA and joining Thomas O. Bailey, so he has a special relationship with his customers and understands their point of view.  Jack approaches business in the utmost professional way and uses language normal people can understand.  If you have a problem or business issue to solve, he is better than Advil to take your pain away!  Jack is a sports enthusiast and especially loves baseball and soccer!

Jack shared a lot of information about the Tax Cuts and Jobs Act.  With tax brackets expanded and the rates lowered the overall effective tax rate should be lower.  However, due to other changes, a  reduction in the tax bill for most taxpayers is not assured!  There are a lot of provisions in the Act that are good for those who own their own businesses.

The Standard Deduction has been almost doubled in an effort to reduce those who need to itemize.  The Personal and Dependent Exemptions have been removed since the standard deductions are higher; hard to say if you will benefit.  The Individual Health Care Mandate penalty has been removed.  The Child Tax credit is now $2,000.  529 Accounts can be used for elementary and secondary school expenses and not just for college.

Personal and Nonbusiness Deductions have been changed in many ways.  Itemized deductions are no longer limited because of income.  Home mortgage interest maximum indebtedness was $1M, but is now $750K for new loans (existing loans are grandfathered).  Home equity loan interest is not deductible.  State and local tax deductions are limited to $10,000 for personal deductions.  Personal casualty and theft losses are suspended unless incurred in a Federally declared disaster.  Charitable contribution deduction limitation is increased from 50% to 60% of income.  Medical expense threshold is 7.5% of AGI for all taxpayers.  For divorces effective after 12/31/18, alimony will no longer be deductible nor will it be income for the recipient.  Moving expenses are no longer deductible except for the military.  Seating rights payments are no longer a charitable deduction.  Miscellaneous deductions are not deductible like: job expenses, tax preparation and investment fees.  This just means that investment advisors need to restructure their fees so they are deductible according to this new code.

Moving expense reimbursements paid by your comany are now considered income.  There are some changes to Roth IRA conversions, rollovers and distributions as to what is excluded from gross income.

The Estate exclusion increases to $10M plus inflation adjustment.

The individual exemption amounts as well as phase-out amounts for the Alternative Minimum Tax have increased and the Corporate Alternative Minimum Tax has been repealed.  For Pass-Through Entities, there is a 20% deduction of qualified business income for partnerships, S Corporations and sole proprietors, with numerous limitations and exceptions.

Corporate provisions have changed in big ways.  The tax rate is now a flat 21%.  The deduction for dividends received has changed.  Bonus depreciation has increased from 50% to 100%.  Section 179 expensing has increased from $500K to $1M with more qualifying property so you can write off more purchases.  The gross receipts amount for cash method of accounting has increased to $25M.  Net Operating Loss deduction has been reduced to 80% of income.  The entertainment expense deduction has been eliminated, but meals are still covered at 50% (as long as not furnished to employees on premises) – so don’t label it “entertainment”!

Other provisions include a restriction that like-kind exchanges are now limited to only real property and Congress can no longer deduct $3,000 living expenses when away from their home state.  Congress has really done their part!

Questions and Answers:  Things that happened since Tom joined the DEA:

  • 2010 We had some famous legislation, still being debated today:  The Affordable Care Act
  • 2009 A plane landed in an unusual spot:  the Hudson River
  • 2007 An indespensible item appeared for the first time:  IPhone
  • 1994 A website was born that is essential for shopping:
  • 1990 An African leader was released from prison:  Nelson Mandela
  • 1989 A well-known dividing point was gone:  Berlin Wall
  • 1985 Who was the new leader of the Soviet Union?  Gorbachev
  • 1981 A president was shot:  President Reagan
  • 1980 The year Tom Bailey joined the DEA, what volcano erupted?  Mount St. Helens

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