Unearned Income of Children (The Kiddie Tax)
- Starting in 2018, children's unearned income will be taxed according to the trust tax brackets and will no longer tied to their parent's tax rates.
- You can still elect to have your children's income reported on your return subject to the gross income rules (This usually applies when stock is sold.)
- Earned income will still be taxed using the single brackets - no change
- California has not adopted these changes and the child's income will be taxed at the parents' rates.
Net Operating Losses
- NOL carrybacks have been eliminated starting in 2018 with a few rare exceptions.
- The NOL deduction will be limited to 80% of the taxpayer's taxable income for the year of the claimed deduction.
- Carryovers are unlimited (previously 20 years).
- 2017 and prior year NOLs are not subject to the 80% rule so they must be tracked separately.
- California did not adopt the above changes. They allow 100% and you can carryback losses 2 years and forward 20 years.
- The TCJA repeals the rule allowing taxpayers to recharacterize Roth IRA conversions as traditional IRA contributions to unwind a Roth conversion effective for conversions starting in 2018.
- You can still do "back door" Roth conversions. High-income individuals contribute to a traditional IRA and then roll the contribution over to a Roth IRA. You must understand that all IRA's are aggregated so you need to consult your CPA before doing this.
ACA Individual Mandate
- The TCJA reduces the amount of the ACA individual shared payment to $0 starting 1/1/19. This means that you still are required to have health insurance for 2017 and 2018.