Khaas Baat : A Publication for Indian Americans in Florida




The recently enacted Tax Cuts and Jobs Act (TCJA) is a sweeping tax package. Here's a look at some of the more important elements of the new law that have an impact on individuals. Unless otherwise noted, the changes are effective for tax years beginning in 2018 through 2025.

Tax rates. The new law imposes a new tax rate structure with seven tax brackets: 10%, 12%, 22%, 24%, 32%, 35% and 37%. The top rate was reduced from 39.6% to 37% and applies to taxable income above $500,000 for single taxpayers, and $600,000 for married couples filing jointly. The rates applicable to net capital gains and qualified dividends were not changed same as before 15%. The "kiddie tax" rules were simplified. The net unearned income of a child subject to the rules will be taxed at the capital gain and ordinary income rates that apply to trusts and estates. Thus, the child's tax is unaffected by the parent's tax situation or the unearned income of any siblings.

Top rate for each bracket summarized here:





Head of House Hold


$ 9,525

$ 19,050

$ 9,525

$ 13,600


$ 38,700

$ 77,400

$ 38,700

$ 51,800


$ 82,500

$ 165,000

$ 82,500

$ 82,500



$ 157,500

$ 315,000

$ 157,500

$ 157,500


$ 200,000

$ 400,000

$ 200,000

$ 200,000


$ 500,000

$ 600,000

$ 300,000

$ 500,000

Standard deduction. The new law increases the standard deduction to $24,000 for joint filers, $18,000 for heads of household, and $12,000 for singles and married taxpayers filing separately.

Exemptions. The new law suspends the deduction for personal exemptions for self or dependents.

New deduction for "qualified business income." Starting in 2018, taxpayers are allowed a deduction equal to 20 percent of "qualified business income," otherwise known as "pass-through" income, i.e., income from partnerships, S corporations, LLCs and sole proprietorships. The income must be from a trade or business within the U.S. Investment income does not qualify, nor do amounts received from an S corporation as reasonable compensation or from a partnership as a guaranteed payment for services provided to the trade or business. The deduction is not used in computing adjusted gross income, just taxable income. For taxpayers with taxable income above $157,500 ($315,000 for joint filers), (1) a limitation based on W-2 wages paid by the business and depreciable tangible property used in the business is phased in, and (2) income from the following trades or businesses is phased out of qualified business income: health, law, consulting, athletics, financial or brokerage services, or where the principal asset is the reputation or skill of one or more employees or owners.

Child and family tax credit. The new law increases the credit for qualifying children (i.e., children under 17) to $2,000 from $1,000, and increases to $1,400 the refundable portion of the credit. It also introduces a new (nonrefundable) $500 credit for a taxpayer's dependents who are not qualifying children. The adjusted gross income level at which the credits begin to be phased out has been increased to $200,000 ($400,000 for joint filers).

State and local taxes. The itemized deduction for state and local income and property taxes is limited to a total of $10,000 ($5,000 for separate filers) starting in 2018.

Mortgage interest. Under the new law, mortgage interest on loans used to acquire a principal residence and a second home is only deductible on debt up to $750,000 (down from $1 million), starting with loans taken out in 2018. And there is no longer any deduction for interest on home equity loans, regardless of when the debt was incurred.

Miscellaneous itemized deductions. There is no longer a deduction for miscellaneous itemized deductions, which were formerly deductible to the extent they exceeded 2 percent of adjusted gross income. This category included items such as tax preparation costs, investment expenses, union dues and unreimbursed employee expenses.

Medical expenses. Under the new law, for 2017 and 2018, medical expenses are deductible to the extent they exceed 7.5 percent of adjusted gross income for all taxpayers. Previously, the AGI "floor" was 10% for most taxpayers.

Casualty and theft losses. The itemized deduction for casualty and theft losses has been suspended except for losses incurred in a federally declared disaster.

Overall limitation on itemized deductions. The new law suspends the overall limitation on itemized deductions that formerly applied to taxpayers whose adjusted gross income exceeded specified thresholds.

Moving expenses. The deduction for job-related moving expenses and exclusion for moving expense reimbursements have been eliminated, except for certain military personnel.

Alimony. For post-2018 divorce decrees and separation agreements, alimony will not be deductible by the paying spouse and will not be taxable to the receiving spouse.

Health care "individual mandate." Starting in 2019, there is no longer a penalty for individuals who fail to obtain minimum essential health coverage.

Estate and gift tax exemption. Effective for decedents dying, and gifts made, in 2018, the estate and gift tax exemption has been increased to roughly $11.2 million ($22.4 million for married couples).

Expansion of tax-free Section 529 plan distributions to include those used to pay qualifying elementary and secondary school expenses, up to $10,000 per student per tax year

Alternative minimum tax (AMT) exemption. The AMT has been retained for individuals by the new law but the exemption has been increased to $109,400 for joint filers ($54,700 for married taxpayers filing separately), and $70,300 for unmarried taxpayers.

Sanjay Gupta, CPA, FCA, who has 27 years of experience in accounting and taxes, is based in Plantation. He can be reached at [email protected] or visit www.sanjayguptacpa.com


Working Without a Net in the Gig Economy


Millions of Americans are trading full-time jobs for the freedom (and risks) of self-employment. If you are thinking of joining them, consider these insights from Merrill Lynch Wealth Management.

More and more American workers are relying on temporary “gigs” to earn a living. It’s easier to do that now, thanks to advances in digital technology, but many who choose this path are also motivated by difficulty finding full-time work. And while you may think of self-employment as a stopgap between full-time jobs, it could easily become your permanent way of working.

Supporting yourself without a guaranteed salary or such traditional full-time benefits as paid vacation and employer-sponsored health-care and retirement plans requires careful planning —and a clear sense of what lies ahead. Here are some basics to consider if you are contemplating diving into the gig economy.

Piece together the health-care puzzle

Rising health-care costs are especially challenging for self-employed people if there is no employer chipping in. For some, the answer may be joining a spouse’s health plan. Others may find coverage through healthcare.gov, or through professional organizations that offer plans for freelancers. You can also try to negotiate for health-care benefits with your gig employers, perhaps in exchange for reduced compensation.

Keep an emergency fund

In the gig economy, any of your clients could cut or slow down payments or even go out of business with little notice. “You will need an emergency fund to be able to withstand those unexpected gaps between gigs and checks,” says Thomas Carter, vice president of Personal Retirement Strategy & Solutions at Merrill Lynch. Finally, do not underestimate your regular expenses. Most of them, from your computer to your business car to tech support, will now fall on your shoulders.

Pay attention to taxes

“When you are working gigs, there is no automatic withholding,” notes Carter. Instead, you will likely be paying quarterly estimated taxes. This requires a greater degree of control over your spending, so that you have enough to cover taxes when they are due. Work with a tax professional who can help you set a strategy for paying taxes, taking advantage of any appropriate deductions.

Start a savings and investment plan

A popular option for the self-employed is a Simplified Employee Pension, or SEP IRA, says Carter. “These have a much higher contribution limit than traditional IRAs.” Generally, sole proprietors with no employees can make deductible contributions of as much as 20 percent of net earnings from the business, up to the maximum annual limit of $54,000 for 2017 ($55,000 for 2018).

For traditional and Roth IRAs, the maximum is $5,500 ($6,500 for those age 50 or over). As with traditional IRAs, you contribute pretax dollars to a SEP IRA, which will not be taxed until you withdraw the funds in retirement. 

Freelancers often contribute one lump sum to a retirement plan at year’s end, says Carter. “But that means investing a year’s worth of savings all at once,” he says. Regularly contributing smaller amounts may allow you to capture lower prices as markets fluctuate, depending on the market prices at the time you contribute.

If your gig does not let you sock away enough money for retirement, look for other ways to generate income. “Perhaps you have a spare room to rent out,” Carter says. “Or you might consider driving for a ride-sharing company a couple of evenings per week.”

Equally important advice: Once you have all your financial ducks in a row, enjoy being your own boss.

IRS, Contribution Limits. https://www.irs.gov/retirement-plans/plan-participant-employee/retriement-topics-contributions

For more information, contact Merrill Lynch Financial Advisor Seema Ramroop of the 26301 U.S. 19 N., Clearwater office at (727) 799-5621 or [email protected]

DISCLAIMER: Merrill Lynch makes available products and services offered by Merrill Lynch, Pierce, Fenner & Smith Incorporated (MLPF&S) and other subsidiaries of Bank of America Corporation.

Investment products:

Are Not FDIC Insured

Are Not Bank Guaranteed

May Lose Value

MLPF&S is a registered broker-dealer, Member SIPC and a wholly owned subsidiary of Bank of America Corporation.

Neither Merrill Lynch nor any of its affiliates or financial advisors provide legal, tax or accounting advice. You should consult your legal and/or tax advisors before making any financial decisions.

© 2017 Bank of America Corporation. All rights reserved. AR36YK4P


"Keep in mind that dollar cost averaging cannot guarantee a profit or prevent a loss in declining markets. Since such investment plan involves continual investment in securities regardless of fluctuating price levels, you should consider your willingness to continue purchasing during periods of high or low price levels."


It's Time for Baby Boomer RMDs!

By haren mehta

In 2016, the first wave of baby boomers turned 70½, and many more reach that milestone in 2017 and 2018. What's so special about 70½? That's the age when you must begin taking required minimum distributions (RMDs) from tax-deferred retirement accounts, including traditional IRAs, SIMPLE IRAs, SEP IRAs, SARSEPs, and 401(k), 403(b), and 457(b) plans. Original owners of Roth IRAs are not required to take RMDs.

If you're still employed (and not a 5 percent owner), you may be able to delay minimum distributions from your current employer's plan until after you retire, but you still must take RMDs from other tax-deferred accounts (except Roth IRAs). The RMD is the smallest amount you must withdraw each year, but you can always take more than the minimum amount.

Failure to take the appropriate RMD can trigger a 50 percent penalty on the amount that should have been withdrawn — one of the most severe penalties in the U.S. tax code.

Distribution deadlines

Even though you must take an RMD for the tax year in which you turn 70½, you have a one-time opportunity to wait until April 1 (not April 15) of the following year to take your first distribution. For example:

IRS tables

Annual RMDs are based on the account balances of all your traditional IRAs and employer plans as of Dec. 31 of the previous year, your current age, and your life expectancy as defined in IRS tables.

Most people use the Uniform Lifetime Table (Table III). If your spouse is more than 10 years younger than you and the sole beneficiary of your IRA, you must use the Joint Life and Last Survivor Expectancy Table (Table II). Table I is for account beneficiaries, who have different RMD requirements than original account owners. To calculate your RMD, divide the value of each retirement account balance as of Dec. 31 of the previous year by the distribution period in the IRS table.

Aggregating accounts

If you own multiple IRAs (traditional, SEP, or SIMPLE), you must calculate your RMD separately for each IRA, but you can actually withdraw the required amount from any of your accounts. For example, if you own two traditional IRAs and the RMDs are $5,000 and $10,000, respectively, you can withdraw that $15,000 from either (or both) of your accounts.

Similar rules apply if you participate in multiple 403(b) plans. You must calculate your RMD separately for each 403(b) account, but you can take the resulting amount (in whole or in part) from any of your 403(b) accounts. But RMDs from 401(k) and 457(b) accounts cannot be aggregated. They must be calculated for each individual plan and taken only from that plan.

Also keep in mind that RMDs for one type of account can never be taken from a different type of account. So, for example, a 401(k) required distribution cannot be taken from an IRA. In addition, RMDs from different account owners may never be aggregated, so one spouse's RMD cannot be taken from the other spouse's account, even if they file a joint tax return. Similarly, RMDs from an inherited retirement account may never be taken from accounts you personally own.

Birthday Guide: This chart provides sample RMD deadlines for older baby boomers.

Month & year of birth

Year you turn 70½

First RMD due

Second RMD due

Jan. 1946 to June 1946


April 1, 2017

Dec. 31, 2017

July 1946 to June 1947


April 1, 2018

Dec. 31, 2018

July 1947 to June 1948


April 1, 2019

Dec. 31, 2019

July 1948 to June 1949


April 1, 2020

Dec. 31, 2020

July 1949 to June 1950


April 1, 2021

Dec. 31, 2021

DISCLAIMER: Securities and Investment Advisory services offered through SagePoint Financial, Inc., member FINRA/SIPC and a registered investment advisor. Fixed and/or Traditional Insurance Services may be offered through Capital Insurance & Asset Protection LLC, which is not affiliated with SagePoint Financial or registered as a broker-dealer or investment advisor.

To the extent that this material concerns tax matters, it is not intended or written to be used, and cannot be used, by a taxpayer for the purpose of avoiding penalties that may be imposed by law. Each taxpayer should seek independent advice from a tax professional based on his or her individual circumstances.

Haren Mehta, managing partner of Capital Insurance & Asset Protection in Tampa, can be reached at (813) 679-5204 or email [email protected]

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