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 your
Child Tax Credit and Additional Child Tax Credit. The maximum credit increased to $2,000 per
qualifying child. Up to $1,400 of the credit can be refundable for each qualifying child as the
additional child tax credit. In addition, the income threshold at which the child tax credit begins to
phase 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 qualifying
dependents other than children who can be claimed for the child tax credit. The qualifying dependent
must be a U.S. citizen, U.S. national, or U.S. resident alien. The credit is calculated with the child tax
credit in the form instructions. The total of both credits is subject to a single phase out when adjusted
gross income exceeds $400,000 if married filing jointly and $200,000 for all other taxpayers. This
means that you may be able to claim this credit if you have children age 17 or over, including college
students, children with ITINs, or other older relatives in your household.
Social Security Number Required for Child Tax Credit. Your child must have a Social Security
Number 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 Additional
Child Tax Credit. Children with an ITIN can’t be claimed for either credit. If your child’s
immigration status has changed so that your child is now a U.S. citizen or permanent resident, but the
child’s social security card still has the words “Not valid for employment” on it, ask the SSA for a
new social security card without those words. If your child doesn’t have a valid SSN, your child may
still qualify you for the Credit for Other Dependents. This is a non-refundable credit of up to $500
per 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 to
claim 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, the
deduction applies at the partner or shareholder level. Special rules apply to specified agricultural or
horticultural cooperatives. A limitation based on Form W-2 wages and capital gain is phased in when
the taxpayer’s taxable income exceeds a $160,700 ($321,400 MFJ) threshold amount. A
disallowance of the deduction with respect to specified service trades or businesses is also phased in
when taxable income exceeds the threshold amount. These limitations are phased-in if taxable
income 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 the
depreciation limitations under IRC section 280F that apply to listed property. For passenger
automobiles placed in service after December 31, 2017, and for which bonus depreciation under IRC
section 168(k) is not claimed, the maximum amount of allowable depreciation is $10,100 for the year
in 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 or
peripheral equipment from the definition of listed property. Such property is therefore not subject to
the heightened substantiation requirements that apply to listed property.
Depreciation Section 179 Expense Deduction. The new law increases the maximum
amount a taxpayer may expense under Section 179 to $1,020,000, while the SUV limit is $25,500. It
increases the phase-out threshold amount to $2,550,000. The provision provides that the maximum
amount a taxpayer may expense is $1,020,000 of the cost of qualifying property placed in service for
the tax year. The $1,020,000 amount is reduced (but not below zero) by the amount by which the cost
of qualifying property placed in service during the tax year exceeds $2,505,000. The new law
expands the definition of Section 179 property to include certain depreciable tangible personal
property used predominantly to furnish lodging or in connection with furnishing lodging. Property
used predominantly to furnish lodging or in connection with furnishing lodging generally includes
beds and other furniture, refrigerators, ranges, and other equipment used in the living quarters of a
lodging 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 qualified
real property eligible for Section 179 expensing to include any of the following improvements to
nonresidential 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 and
Domestic Production Activities Deduction. The domestic production activities deduction
under IRC section 199 is no longer allowed.
Entertainment Expense Deduction. The new law provides that no deduction is allowed
with 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 social
purposes, or 3) A facility or portion thereof used in connection with any of the above items. The
provision 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 active
conduct of the taxpayer’s trade or business (and the related rule applying a 50% limit to such
deductions). The new law also disallows a deduction for expenses associated with providing any
qualified transportation fringe to employees of the taxpayer, and except as necessary for ensuring the
safety of an employee, any expense incurred for providing transportation (or any payment or
reimbursement) for commuting between the employee’s residence and place of employment.
Taxpayers may still generally deduct 50% of the food and beverage expenses associated with
operating their trade or business (e.g., meals consumed by employees on work travel, not 100%). For
amounts incurred and paid after December 31, 2017 and until December 31, 2025, the law expands
this 50% limitation to expenses of the employer associated with providing food and beverages to
employees through an eating facility that meets requirements for de minimis fringes and for the
convenience of the employer. Such amounts incurred and paid after December 31, 2025, are not
Health Flexible Spending Arrangement (FSA). Voluntary employee salary reduction
contributions to a health FSA connot exceed $2,700 for 2019. This amount increases to $2,750 for
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 family
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