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The Tax Cuts and Jobs Act – Implications for Nurse Practitioners

Thursday, January 18, 2018   (0 Comments)
Posted by: Suzanna Roberts
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The Tax Cuts and Jobs Act – Implications for Nurse Practitioners

The Tax Cuts and Jobs Act (TCJA) was signed into law December 22nd, taking effect January 1, 2018. The new legislation included major changes to individual and business tax planning.  Here are some provisions in the new law I think are of importance to nurse practitioners both as healthcare professionals and as individuals.

 

Federal Tax Rates and Brackets:

The number of tax brackets remains the same at seven, but the income thresholds and rates have changed.  The tax rates fall for most thresholds and most individuals should pay less in taxes with the new rates and brackets.

Single Filing Status

Prior Law

Tax Cuts and Job Act

Bracket

Rate

Rate

Bracket

$0
$9,526
$38,701
$93,701
$195,451
$424,951
$426,700

- $9,525
- $38,700
- $93,700
- $195,450
- $424,950
- $426,700
+

10%
15%

25%
28%
33%
35%
39.6%

10%
12%
22%
24%
32%
35%
37%

$0
$9,526
$38,701
$93,701
$157,501
$200,001
$500,001

- $9,525
- $38,700
- $82,500
- $157,500
- $200,000
- $500,000
+


Married Filing Jointly Status

Prior Law

Tax Cuts and Job Act

Bracket

Rate

Rate

Bracket

$0
$19,051
$77,401
$156,151
$237,951
$424,951
$480,051

-$19,050
-$77,400
-$156,150
-$237,950
-$424,950
-$480,050
+

10%
15%

25%
28%
33%
35%
39.6%

10%
12%
22%
24%
32%
35%
37%

$0
$19,051
$77,401
$165,001
$315,001
$400,001
$600,001

-$19,050
-$77,400
-$165,000
-$315,000
-$400,000
-$600,000
+

 

 

Miscellaneous Itemized Deductions

Miscellaneous itemized deductions are suspended. Items falling under this category, including tax preparation fees, investment management fees and unreimbursed employee business expenses are no longer deductible.  NPs will no longer be able to deduct unreimbursed continuing education expenses, uniforms and other business-related expenses as a miscellaneous itemized deduction.


Deductions for Qualified Business Income

This provision in the new tax law may have a significantly positive affect for self-employed nurse practitioners.  The new tax law provides a deduction for up to 20% of the qualified business income from flow-through entities (including sole proprietorships, partnerships, S-Corporations and LLCs).  In other words, the taxable income you receive as a self-employed NP could be reduced by 20%.

The deduction is subject to phaseout provisions for service related businesses, which includes healthcare, law, consulting, athletics, financial services and brokerage services, but the 20% deduction is allowed for NPs with taxable income below $315,000 for married filers and below $157,500 for single filers.   

 

Mortgage Interest

Mortgage interest can still be itemized, but the amount of deductible mortgage interest on loans opened after December 15, 2017, is restricted to $750,000, down from the previous level of $1,000,000. Interest on home equity loans, however, is no longer deductible on both new and existing home equity loans.


Child Tax Credit

The maximum child tax credit doubled from $1,000 to $2,000 per child and the phaseout thresholds are increased. The credit phaseout kicks in for taxpayers with adjusted gross income exceeding $400,000 for married filers and $200,000 for single filers. The phaseout thresholds are not set to index for inflation.


Residence Sale Exclusion

The amount of the exclusion remains the same, $500,000 for married taxpayers and $250,000 for single taxpayers, but the length of time a taxpayer must own and use a residence to qualify for the residence sale exclusion has increased from prior law. The exclusion requires taxpayers to have owned and used the residence as a principal residence for a minimum of five of the eight years before sale. Under prior law, taxpayers were required to use the residence as their primary residence at least two of the last five years before sale. The exclusion can only apply once during any five-year period.


Alimony

Taxation of alimony has been reversed.  Alimony was formerly a deduction for the payor, and included as income for the recipient.  Alimony will no longer deductible by the payor, and alimony received will no longer be considered taxable income for the recipient effective for divorces executed after December 31, 2018.  Divorces executed before December 31, 2018, will follow prior law.


The Tax Cuts and Jobs Act made sweeping changes to tax law and these are just a few of the changes resulting from its passage.  In preparation of your 2018 tax return, it will be especially important to consult your personal tax advisor to take advantage of the benefits of the new law and make sure you are in compliance with its new provisions.


David L. Stull, CFP® is a CERTIFIED FINANCIAL PLANNER™ professional with Storehouse Financial LLC and former CRNA. Information in this article is general in nature and not necessarily applicable to every individual. Please direct comments or questions regarding this article to david@storehousefinancial.com.

 

 


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