United States: Tax Cuts And Jobs Act Of 2017 – What You Need To Know

President Trump is expected to sign sweeping tax legislation into law before December 25, 2017. Although the exact content of the Tax Cuts and Jobs Act of 2017 ("TCJA") is not entirely certain, we have an indication based upon a report issued by the House-Senate Conference Committee on December 15, 2017. This alert summarizes a few provisions of the proposed TCJA most directly related to trusts and estates.

Estate and Gift Tax

The proposed TCJA increases the federal estate and gift tax exemption to $10 million, indexed for inflation, for decedents dying and gifts made after 2017 and before 2026. In 2018, this amount is estimated to be approximately $11.2 million. When the proposed TCJA sunsets on January 1, 2026, the estate and gift tax exemption reverts to the inflation adjusted $5 million exemption, which is estimated to be approximately $6.5 million. The proposed TCJA does not provide for a repeal of the federal estate or gift tax.

Generation-Skipping Transfer Tax

The GST tax provisions in the proposed TCJA mirror the estate and gift tax provisions. Specifically, the GST tax exemption will increase to $10 million, indexed for inflation, for generation-skipping transfers made after 2017 and before 2026.

Charitable Giving

For many taxpayers, 2017 will be the last year they get income tax savings from their charitable gifts. The Joint Committee on Taxation estimates that the number of taxpayers who will itemize their deductions in 2018 (and thereby get tax savings from charitable gifts) will fall from 40 million under current law to just 9 million, due to the anticipated increase in the standard deduction ($24,000 for a joint return, $18,000 for an unmarried individual with at least one qualifying child, and $12,000 for single filers, all indexed for inflation).

Taxpayers who will itemize their deductions in 2017, but will not itemize in 2018, should consider accelerating their charitable gifts into 2017. There are a number of ways to do this. One way to get an income tax deduction in 2017 for gifts that a charity will not receive until 2018 or later is to contribute to a "donor advised fund" in 2017. Then, in future years, the donor advised fund can make grants to charities. Many organizations administer donor advised funds, including your favorite community foundation.  Some organizations will open donor advised funds for as little as $5,000, and permit grants as small as $50.

In addition, taxpayers who made a multi-year pledge to a charity should consider paying the amounts scheduled for future years in 2017. When doing so, taxpayers should consider inquiring into whether the charity will give the taxpayer credit in 2018 for the larger amount pre-paid in 2017 (e.g., "sponsor" or "patron" status in 2018).

Pass-through Income

Under current law, the net income of pass-through businesses is reported by the owners on their individual income tax returns and is, therefore, subject to their individual income tax rates. Under the proposed TCJA, for years beginning after December 31, 2017, and before January 1, 2026, a non-corporate taxpayer who has qualified business income from a pass-through entity is allowed a 20% deduction for the non-wage portion of the pass-through income, subject to certain limitations. As of the writing of this alert, this deduction does not apply to certain service businesses.

There was great concern about whether this deduction would apply to trusts and estates owning pass-through business interests. As of the writing of this alert, trusts and estates are also eligible for the 20% deduction.

529 Plans

Under current law, funds in a 529 plan can be used for "qualified higher education expenses." Eligible schools are limited to post-secondary institutions. Under the proposed TCJA, distributions after 2017 can also be made for elementary or secondary public, private, or religious school expenses, and for various expenses associated with homeschool.

Rollovers from 529 Plans to ABLE Accounts

ABLE (Achieving a Better Life Experience) accounts allow people with disabilities to save money without losing their eligibility for public benefits. This relatively new tool is aimed at providing increased financial security and stability to individuals receiving public benefits.  Under the proposed TCJA, taxpayers would be permitted to rollover amounts from 529 plan accounts to ABLE accounts, if certain criteria are met.

State and Local Tax

Under current law, taxpayers can claim itemized deductions for several taxes paid at the state and local level, including property taxes, income taxes, and sales taxes.  Under the proposed TCJA, for tax years beginning after December 31, 2017 and before January 1, 2026, a taxpayer is limited to a $10,000 deduction ($5,000 if married filing separate) for the aggregate of these taxes.

Concerned that taxpayers may try to avoid this limitation for years beginning in 2018, the proposed TCJA includes language prohibiting an itemized deduction in 2017 for the prepayment of state income and property taxes for 2018.  Taxpayers are encouraged to consult with their tax return preparers to determine how this limitation may affect their 2017 year-end planning.

Kiddie Tax

Under current law, the "kiddie tax" taxes the unearned income of a child at the parents' tax rates if the parents' tax rates are higher than the tax rates of the child, if certain criteria are met.  Under the proposed TCJA, beginning January 1, 2018, the unearned income of a child will be taxed according to the tax brackets applicable to trusts and estates, which reach the maximum tax bracket much more quickly than individual taxpayers.  For example, after only $12,500 of taxable income, trusts and estates are taxed at a 37% rate, while individuals are not taxed at a 37% rate until their taxable income exceeds $300,000.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Similar Articles
Relevancy Powered by MondaqAI
Duane Morris LLP
Breazeale, Sachse, & Wilson, LLP
DiGabriele, McNulty, Campanella & Co., LLC
Stoel Rives LLP
 
In association with
Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Duane Morris LLP
Breazeale, Sachse, & Wilson, LLP
DiGabriele, McNulty, Campanella & Co., LLC
Stoel Rives LLP
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions