2018 Tax Changes
 

I know I'm super early with this (I'm getting ahead of my bookkeeping so I don't need to scramble at the end of the year). Do we have any insight on how tax changes will impact us/write-offs/deductions? As of now, I'm cataloging everything the same way I always have.

I should add that the standard deduction piece is what is really confusing to me. I've read Tom's awesome updates, but I'm super confused about how the new, higher standard deduction will work and what this means for itemizing.

2018 tax changes
 

Originally Posted by LittleScholars:
I should add that the standard deduction piece is what is really confusing to me. I've read Tom's awesome updates, but I'm super confused about how the new, higher standard deduction will work and what this means for itemizing.

The higher standard deduction means many fewer providers will itemize their personal expenses on Schedule A. Providers will still be able to claim the business portion of property taxes and mortgage interest on Form 8829.

In general, this means lower taxable income for many providers. It's complicated, so I've written about it here: http://tomcopelandblog.com/are-you-w...stimated-taxes

Here's a general summary of the 2018 tax changes:

I'll be writing about this more on my blog this fall and winter and I'll be doing webinars on it as well.

Originally Posted by TomCopeland:
The higher standard deduction means many fewer providers will itemize their personal expenses on Schedule A. Providers will still be able to claim the business portion of property taxes and mortgage interest on Form 8829.

In general, this means lower taxable income for many providers. It's complicated, so I've written about it here: http://tomcopelandblog.com/are-you-w...stimated-taxes

Here's a general summary of the 2018 tax changes:

I'll be writing about this more on my blog this fall and winter and I'll be doing webinars on it as well.

I'll be following your work closely! Thank you!!

Does this mean I can pay my son more on his w-2 without withholding this year? Since the standard deduction is higher....

withholding
 

Originally Posted by hwichlaz:
Does this mean I can pay my son more on his w-2 without withholding this year? Since the standard deduction is higher....

The standard deduction for a single person this year is $12,000. So, if you paid your son less than this, he won't owe income taxes on it. If he is under age 18 you won't owe any Social Security/Medicare taxes. However, you must be able to justify what you pay your son. It can't be "unreasonable compensation" for the work he does.

Tom,

I'm getting slightly off topic but I'd love to know your thoughts at some point about whether the food program is still going to be beneficial with the standard deduction. For the first time, I'm actually wondering if having a higher income is going to help or hurt me overall.

Perhaps I need to start processing this change differently and actually crunch the numbers (which is a little overwhelming!), because the thought of not itemizing is killing me, but I'm hoping overall the numbers still work in favor of most providers. The article you attached earlier in this thread was very helpful.

Food Program
 

Originally Posted by LittleScholars:
Tom,

I'm getting slightly off topic but I'd love to know your thoughts at some point about whether the food program is still going to be beneficial with the standard deduction. For the first time, I'm actually wondering if having a higher income is going to help or hurt me overall.

Perhaps I need to start processing this change differently and actually crunch the numbers (which is a little overwhelming!), because the thought of not itemizing is killing me, but I'm hoping overall the numbers still work in favor of most providers. The article you attached earlier in this thread was very helpful.

The higher personal standard deduction has nothing to do with the Food Program. That is, you must always claim the CACFP reimbursements as income (except for those received for your own eligible children) and you can use the standard meal allowance method to claim food expenses. This doesn't change with the higher personal standard deduction. The higher standard deduction is likely to lower, not raise, your taxable income.

But, let's assume your income goes up and you now don't qualify for the higher Tier I rate on the Food Program and start receiving the lower Tier II rate. Even so, you are better off getting some money from the Food Program than no money. Your food deduction does not change, regardless of whether you are on Tier I or Tier II. Therefore, you are always better off financially by being on the Food Program.

Originally Posted by TomCopeland:
The higher personal standard deduction has nothing to do with the Food Program. That is, you must always claim the CACFP reimbursements as income (except for those received for your own eligible children) and you can use the standard meal allowance method to claim food expenses. This doesn't change with the higher personal standard deduction. The higher standard deduction is likely to lower, not raise, your taxable income.

But, let's assume your income goes up and you now don't qualify for the higher Tier I rate on the Food Program and start receiving the lower Tier II rate. Even so, you are better off getting some money from the Food Program than no money. Your food deduction does not change, regardless of whether you are on Tier I or Tier II. Therefore, you are always better off financially by being on the Food Program.

OH! I think I'm discovering my area of confusion and real question. I had been under the impression that if one takes the standard deduction we lose the ability to itemize anything (other than the business portion of taxes and mortgage interest). Is that not the case?

Originally Posted by LittleScholars:
OH! I think I'm discovering my area of confusion and real question. I had been under the impression that if one takes the standard deduction we lose the ability to itemize anything (other than the business portion of taxes and mortgage interest). Is that not the case?

It doesn’t change your business expense deductions at all. Only personal.

standard deduction
 

Originally Posted by LittleScholars:
OH! I think I'm discovering my area of confusion and real question. I had been under the impression that if one takes the standard deduction we lose the ability to itemize anything (other than the business portion of taxes and mortgage interest). Is that not the case?

Taking the standard deduction does mean not be able to claim as personal expenses property tax, mortgage interest, medical expenses, charitable contributions and all other expenses that used to show up on Schedule A. But, you can still deduct the business portion of property tax and mortgage interest and all other business expenses.

TOM, I have to itemize personal because of a bloodline trust regardless of having any business income or not; Also, this years income is much less than normal due to not working over 4 months because of severe medical issues & being waived on medical insurance due to my state and low income so outstanding medical bills are over 4 times what I would have made doing daycare in a normal year, much less this one - no hubby, just my income and I am so in the red it's not funny (looking at bankruptcy)... how will this affect me?

standard deduction
 

Originally Posted by LysesKids:
TOM, I have to itemize personal because of a bloodline trust regardless of having any business income or not; Also, this years income is much less than normal due to not working over 4 months because of severe medical issues & being waived on medical insurance due to my state and low income so outstanding medical bills are over 4 times what I would have made doing daycare in a normal year, much less this one - no hubby, just my income and I am so in the red it's not funny (looking at bankruptcy)... how will this affect me?

Assuming your itemized deductions are above $24,000 (the amount you can claim as a standard deduction for married couples), then are better off itemizing. This will still have no impact whatsoever on your ability to claim all your normal business deductions.

Originally Posted by TomCopeland:
Assuming your itemized deductions are above $24,000 (the amount you can claim as a standard deduction for married couples), then are better off itemizing. This will still have no impact whatsoever on your ability to claim all your normal business deductions.

I'm divorced so file single no children, but will still have medical loss of 100,000, only 5000 is getting paid if I'm lucky before filing bankruptcy ( and because My manufactured home is on rented land , I lose it in the bankruptcy if I go 7 not 13 due to state law and what it's worth - still undecided on whether to actually file)... I normally only gross 25000 at most in a good year lol. I own the house & car outright thanks to the trust & even then there is major loss for the last 2 years due to things happening with holdings