https://www.stuvia.com/user/lectkeshi
SUPPLEMENT TO
TAXATION FOR DECISION MAKERS, 2018 EDITION
Shirley Dennis-Escoffier and Karen A. Fortin
Changes introduced by the Tax Cuts and Jobs Act of 2017
https://www.stuvia.com/user/lectkeshi
INTRODUCTION
On December 22, 2017, President Trump signed into law the
Tax Cuts and Jobs Act (TCJA) that represents the most
comprehensive changes to the tax law in over 30 years. TCJA
impacts all taxpayers by eliminating or changing many long-
standing rules and adding new provisions. While Congress
made most corporate changes permanent, the changes to the
individual rates and deductions are temporary to comply with
budget rules under reconciliation. As a result, most individual
changes are effective for tax years beginning after December
31, 2017 and before January 1, 2026; effectively suspending
existing law with the 2017 rules reinstated in 2026.
This supplement updates the text for these revisions as well as
other important changes since publication. Changes made
retroactively affecting 2017 tax returns are discussed first; then
, Supplement to Taxation for Decision Makers, 2018 Edition
changes affecting future years are highlighted in the next
section of this supplement. These changes are keyed to the
2018 edition by chapter and section number.
RETROACTIVE CHANGES
Chapter Section Brief Description of Change
5 5.4.1 The minimum amount of unreimbursed
5.7.2 medical expenses that are not deductible is
reduced from 10% to 7.5% of AGI for 2017
and 2018 for all taxpayers (regardless of
age) for regular income tax and for the
alternative minimum tax (AMT). The 10%
threshold is reinstated in 2019 for regular
tax and AMT.
5&9 5.4.5 The $100 floor for casualty losses from
9.3.1 disasters in 2016 or 2017 is raised to $500
per casualty and the 10%-of-AGI threshold
does not apply. Taxpayers who do not
itemize can increase their standard
deduction by the net disaster loss for these
two years.
7 7.3.2 Bonus Depreciation is increased from 50
percent to 100 percent for purchases after
September 27, 2017. A more detailed
2
, Supplement to Taxation for Decision Makers, 2018 Edition
discussion of this provision with an example
follows.
Retroactive Change to Bonus Depreciation
Prior to the passage of the Tax Cuts and Jobs Act, bonus
depreciation only applied to new (not used) property at a 50%
rate. TCJA temporarily increased bonus depreciation to 100%
for assets acquired after September 27, 2017 and extended it
to used property. The 100% rate will begin to phase out after
2022 and expire at the end of 2026.
Property previously used by an unrelated taxpayer may
qualify for bonus depreciation if purchased and placed in
service after September 27, 2017 and the taxpayer had not
used the property at any time before acquisition. Additionally,
the property’s basis cannot be determined by reference to the
adjusted basis of the taxpayer from whom it was acquired
(carryover basis transactions).
If there was a written binding contract to acquire property
in effect prior to September 28,
2017, the property is deemed acquired the date the contract
was entered into and is not eligible for the 100% bonus
depreciation rate. Instead, the 50% bonus rate applies with
3
SUPPLEMENT TO
TAXATION FOR DECISION MAKERS, 2018 EDITION
Shirley Dennis-Escoffier and Karen A. Fortin
Changes introduced by the Tax Cuts and Jobs Act of 2017
https://www.stuvia.com/user/lectkeshi
INTRODUCTION
On December 22, 2017, President Trump signed into law the
Tax Cuts and Jobs Act (TCJA) that represents the most
comprehensive changes to the tax law in over 30 years. TCJA
impacts all taxpayers by eliminating or changing many long-
standing rules and adding new provisions. While Congress
made most corporate changes permanent, the changes to the
individual rates and deductions are temporary to comply with
budget rules under reconciliation. As a result, most individual
changes are effective for tax years beginning after December
31, 2017 and before January 1, 2026; effectively suspending
existing law with the 2017 rules reinstated in 2026.
This supplement updates the text for these revisions as well as
other important changes since publication. Changes made
retroactively affecting 2017 tax returns are discussed first; then
, Supplement to Taxation for Decision Makers, 2018 Edition
changes affecting future years are highlighted in the next
section of this supplement. These changes are keyed to the
2018 edition by chapter and section number.
RETROACTIVE CHANGES
Chapter Section Brief Description of Change
5 5.4.1 The minimum amount of unreimbursed
5.7.2 medical expenses that are not deductible is
reduced from 10% to 7.5% of AGI for 2017
and 2018 for all taxpayers (regardless of
age) for regular income tax and for the
alternative minimum tax (AMT). The 10%
threshold is reinstated in 2019 for regular
tax and AMT.
5&9 5.4.5 The $100 floor for casualty losses from
9.3.1 disasters in 2016 or 2017 is raised to $500
per casualty and the 10%-of-AGI threshold
does not apply. Taxpayers who do not
itemize can increase their standard
deduction by the net disaster loss for these
two years.
7 7.3.2 Bonus Depreciation is increased from 50
percent to 100 percent for purchases after
September 27, 2017. A more detailed
2
, Supplement to Taxation for Decision Makers, 2018 Edition
discussion of this provision with an example
follows.
Retroactive Change to Bonus Depreciation
Prior to the passage of the Tax Cuts and Jobs Act, bonus
depreciation only applied to new (not used) property at a 50%
rate. TCJA temporarily increased bonus depreciation to 100%
for assets acquired after September 27, 2017 and extended it
to used property. The 100% rate will begin to phase out after
2022 and expire at the end of 2026.
Property previously used by an unrelated taxpayer may
qualify for bonus depreciation if purchased and placed in
service after September 27, 2017 and the taxpayer had not
used the property at any time before acquisition. Additionally,
the property’s basis cannot be determined by reference to the
adjusted basis of the taxpayer from whom it was acquired
(carryover basis transactions).
If there was a written binding contract to acquire property
in effect prior to September 28,
2017, the property is deemed acquired the date the contract
was entered into and is not eligible for the 100% bonus
depreciation rate. Instead, the 50% bonus rate applies with
3
