Changes to Benefits for Dependents. Deduction for personal exemptions are suspended.For 2019, you cannot claim a personal exemption deduction for yourself, your spouse, or yourdependents.Child Tax Credit and Additional Child Tax Credit. The maximum credit increased to $2,000 perqualifying child. Up to $1,400 of the credit can be refundable for each qualifying child as theadditional child tax credit. In addition, the income threshold at which the child tax credit begins tophase out is increased $400,000 if married filing jointly and $200,000 for all other taxpayers.Credit for Other Dependents. A new credit of up to $500 is available for each of your qualifyingdependents other than children who can be claimed for the child tax credit. The qualifying dependentmust be a U.S. citizen, U.S. national, or U.S. resident alien. The credit is calculated with the child taxcredit in the form instructions. The total of both credits is subject to a single phase out when adjustedgross income exceeds $400,000 if married filing jointly and $200,000 for all other taxpayers. Thismeans that you may be able to claim this credit if you have children age 17 or over, including collegestudents, children with ITINs, or other older relatives in your household.Social Security Number Required for Child Tax Credit. Your child must have a Social SecurityNumber issued by the Social Security Administration before the due date of your tax return(including extensions) to be claimed as a qualifying child for the Child Tax Credit or AdditionalChild Tax Credit. Children with an ITIN can’t be claimed for either credit. If your child’simmigration status has changed so that your child is now a U.S. citizen or permanent resident, but thechild’s social security card still has the words “Not valid for employment” on it, ask the SSA for anew social security card without those words. If your child doesn’t have a valid SSN, your child maystill qualify you for the Credit for Other Dependents. This is a non-refundable credit of up to $500per qualifying person. If your dependent child lived with you in the United States and has an ITIN,but not an SSN, issued by the due date of your return (including extensions), you may be able toclaim the new Credit for Other Dependents for that child.Deduction for Qualified Business Income (Pass-Through Entity Deduction). An individual taxpayer generally may deduct 20% of qualified business income from a partnership, S corporation, or sole proprietorship, as well as 20% of aggregate qualified REIT dividends, and qualified publicly traded partnership income. In the case of a partnership or S corporation, thededuction applies at the partner or shareholder level. Special rules apply to specified agricultural orhorticultural cooperatives. A limitation based on Form W-2 wages and capital gain is phased in whenthe taxpayer’s taxable income exceeds a $160,700 ($321,400 MFJ) threshold amount. Adisallowance of the deduction with respect to specified service trades or businesses is also phased inwhen taxable income exceeds the threshold amount. These limitations are phased-in if taxableincome exceeds the threshold amount but is below $255,000 ($510,000 MFJ) (the phase-in range).For purposes of this provision, taxable income is computed without regard to the 20% deduction.Depreciation Luxury Auto Depreciation Limits. The new law increases thedepreciation limitations under IRC section 280F that apply to listed property. For passengerautomobiles placed in service after December 31, 2017, and for which bonus depreciation under IRCsection 168(k) is not claimed, the maximum amount of allowable depreciation is $10,100 for the yearin which the vehicle is placed in service, $16,100 for the second year, $9,700 for the third year, and$5,760 for the fourth and later years in the recovery period. The provision removes computer orperipheral equipment from the definition of listed property. Such property is therefore not subject tothe heightened substantiation requirements that apply to listed property.Depreciation Section 179 Expense Deduction. The new law increases the maximumamount a taxpayer may expense under Section 179 to $1,020,000, while the SUV limit is $25,500. Itincreases the phase-out threshold amount to $2,550,000. The provision provides that the maximumamount a taxpayer may expense is $1,020,000 of the cost of qualifying property placed in service forthe tax year. The $1,020,000 amount is reduced (but not below zero) by the amount by which the costof qualifying property placed in service during the tax year exceeds $2,505,000. The new lawexpands the definition of Section 179 property to include certain depreciable tangible personalproperty used predominantly to furnish lodging or in connection with furnishing lodging. Propertyused predominantly to furnish lodging or in connection with furnishing lodging generally includesbeds and other furniture, refrigerators, ranges, and other equipment used in the living quarters of alodging facility such as an apartment house, dormitory, or any other facility (or part of a facility)where sleeping accommodations are provided. The new law also expands the definition of qualifiedreal property eligible for Section 179 expensing to include any of the following improvements tononresidential real property placed in service after the date such property was first placed in service:Roofs; Heating, ventilation, and air-conditioning property; Fire protection and alarm systems andSecurity systems.Domestic Production Activities Deduction. The domestic production activities deductionunder IRC section 199 is no longer allowed.Entertainment Expense Deduction. The new law provides that no deduction is allowedwith respect to: 1) An activity generally considered to be entertainment, amusement or recreation, 2)Membership dues with respect to any club organized for business, pleasure, recreation or other socialpurposes, or 3) A facility or portion thereof used in connection with any of the above items. Theprovision repeals the prior law exception to the deduction disallowance for entertainment,amusement, or recreation that is directly related to (or, in certain cases, associated with) the activeconduct of the taxpayer’s trade or business (and the related rule applying a 50% limit to suchdeductions). The new law also disallows a deduction for expenses associated with providing anyqualified transportation fringe to employees of the taxpayer, and except as necessary for ensuring thesafety of an employee, any expense incurred for providing transportation (or any payment orreimbursement) for commuting between the employee’s residence and place of employment.Taxpayers may still generally deduct 50% of the food and beverage expenses associated withoperating their trade or business (e.g., meals consumed by employees on work travel, not 100%). Foramounts incurred and paid after December 31, 2017 and until December 31, 2025, the law expandsthis 50% limitation to expenses of the employer associated with providing food and beverages toemployees through an eating facility that meets requirements for de minimis fringes and for theconvenience of the employer. Such amounts incurred and paid after December 31, 2025, are notdeductible.Health Flexible Spending Arrangement (FSA). Voluntary employee salary reductioncontributions to a health FSA connot exceed $2,700 for 2019. This amount increases to $2,750 for2020.Qualified Small Employer Health Reimbursement Arrangement (QSEHRA).For 2019, the total amount of payments and reimbursements under a QSEHRA cannot exceed $5,150($10,450 for family coverage). For 2020, this amount increases to $5,250 ($10,600 for familycoverage).
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