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2018 Tax Reform Changes


The opinions set forth in this website are subject to the disclaimer pertaining to IRS Circular 230 set forth herein.

Unless expressly stated otherwise on this website, (1) nothing contained in this website was intended or written to be used, can be used by any taxpayer, or may be relied upon or used by any taxpayer for the purposes of avoiding penalties that may be imposed on the taxpayer under the Internal Revenue Code of 1986, as amended; (2) any written statement contained on this website relating to any federal tax transaction or matter may not be used by any person to support the promotion or marketing or to recommend any federal tax transaction or matter; and (3) any taxpayer should seek advice based on the taxpayer's particular circumstances from an independent tax advisor with respect to any federal tax transaction or matter contained in this website. No one, without our express written permission, may use any part of this website in promoting, marketing or recommending an arrangement relating to any federal tax matter to one or more taxpayers.


Charitable Contributions:
Please remember that ALL cash donations MUST have a cancelled check, a credit card statement, or a receipt. In the event of an audit, no receipt means the cash contribution deductions will be denied. Cash contributions of $250 or more to a single charitable organization must have a receipt from the receiving organization.

Non-cash contributions of used clothing and household items will also need a receipt in order to claim the deduction. If the total value of any type of non-cash donation is over $5,000, you need a written appraisal.

Individuals who volunteer must obtain written acknowledgement from the receiving organization that describes the services provided. This would include out of pocket expenses incurred while volunteering on mission trips or for foster care, etc.

Charitable contribution receipts must be in your possession by the time your return is filed or the deduction may be disallowed.

Health Savings Accounts:
In order to set up an HSA, you needed to be covered under a high-deductible health insurance plan during 2017. The maximum contribution in 2017 for self-coverage is $3,400 and for a family $6,750. You have until 4/17/18 to make this deposit. If you have attained 55 years of age by year end, you may make additional catch-up contributions of $1,000 for 2017. For 2018, the contribution limits are $3,450 for self and $6,900 for family. The catch up contribution remains $1,000 for 2018.

American Opportunity Credit (AOTC):
The maximum credit is $2,500 per student per year and is available for the first four years of a student’s post-secondary education. Eligible expenses include tuition, fees, and course materials. The income phase-out for single taxpayers is $80,000 - $90,000 and for joint filers $160,000 - $180,000. This credit was made permanent under the PATH Act. You must provide the Form 1098-T from the institution in order to claim this credit.

Expanded Tax-free 529 Plan Withdrawals:
If you have a 529 Plan for education expenses, tax free withdrawals may now be taken for the purchase of any computer technology or equipment or internet access and related services. These items must be used by the beneficiary of the Plan or the beneficiary’s family during the time the beneficiary is enrolled in a post-secondary educational institution.

Off-campus room and board is considered a qualified education expense and includes rent, utilities and food but is limited to the institution’s on-campus living costs.

The law now expands the uses of 529 Plans to include withdrawals up to $10,000 per student per year, for K-12 expenses.

MN offers both a tax credit and a subtraction for contributions made to qualified 529 Plans. The credit equals 50% of contributions, up to a maximum of $500. The credit is subject to income limitations. MN additionally offers a subtraction for contributions to qualified plans. A taxpayer may subtract up to $1,500 ($3,000 for married filing jointly) of contributions made to a qualified plan.

  • For the same contribution amount, the credit will typically provide a larger tax benefit than the subtraction.
  • Income limits apply to the credit, but not the subtraction.
  • The credit can result in a marriage penalty or bonus, while the subtraction can only provide a bonus.

MN Estate Tax Change:
A decedent’s estate that exceeds the exemption must file and pay MN estate tax. In 2017 MN legislature adopted an increased exemption up to $2.1 million for 2017 and $2.4 million for 2018.

Long-Term Care Costs:
A recent court decision clarified that payments made to caregivers for providing physician-ordered assistance and supervision to a patient suffering from dementia qualified as long-term care services, and are therefore deductible as a medical expense, despite the fact that the patient was not ADL certified (unable to perform at least two of six activities of daily living: eating, toileting, transferring, bathing, dressing and continence) and the caregivers were not licensed health care providers. Also, if a patient is ADL certified the full cost of an assisted living facility is deductible as a medical expense.

When to Start Collecting Social Security Benefits?
If you are considering whether or not to collect social security in the next year, please call us to discuss your options. It may be advantageous to wait longer than you planned.

Pension Contribution Limits:
Most retirement plans have been amended to allow for catch-up contributions for those 50 and over. Check with your plan sponsor to see if you are able to utilize this increased deduction.

RETIREMENT PLAN (under age 70½) 2017 2018
IRA* (under age 50) $5,500 $5,500
IRA* (over age 49) $6,500 $6,500
Roth** IRA* (under age 50) $5,500 $5,500
Roth** IRA* (over age 49) $6,500 $6,500
Maximum 401(K) deferral (under age 50) $18,000 $18,500
Maximum 401(K) deferral (over age 49) $24,000 $24,500
Maximum SIMPLE deferral (under age 50) $12,500 $12,500
Maximum SIMPLE deferral (over age 49) $15,500 $15,500
* A single dollar limit applies to the sum of your contributions to your Roth and regular IRAs.
** Roth IRA contributions are never deductible.

Social Security Benefit Subtraction:
Minnesota residents who receive Social Security or Railroad retirement benefits may qualify for a subtraction from income on their state return. The subtraction is available for tax year 2017 and later. The maximum subtraction is $4,500 for those Married Filing Jointly and $3,500 for Single filers. The subtraction is available to individual whose taxable MN income includes Social Security or Railroad Retirement benefits as well as income limitations.

Deductible Mileage Rates:
MILEAGE RATES (per mile) 2017 2018
MEDICAL 17⊄ 18⊄


Business Depreciation:
The IRS Sec.179 fast write-off of the cost of new and used equipment is $500,000 for 2017. For Minnesota the expense limit is $25,000 with 80% of the difference added back in the current year. 20% of this add-back will be subtracted in the succeeding five years.

Under the Tax Cuts and Jobs Act, new and used equipment purchased and placed into service after 9/27/17 is eligible for a100% write-off using bonus depreciation. 80% of the bonus depreciation will be an add back to MN.

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