Tax Changes Impacting San Francisco Residents in the New Law

In our next installment of our blog posts on the new tax law impacting 2018 taxes, we’ll focus on odds and ends. The law changes various provisions of the tax code impacting both businesses and individuals. That said, if you’re looking for a San Francisco tax service for either individuals or businesses, look no further. We can help! Just reach out for a consultation – either at our San Francisco office, or via telephone / WebX.

Other Provisions of the New Tax Law

  • Alimony – For divorce or separation agreements executed after December 31, 2018, the Act would treat alimony and separate maintenance payments as not deductible by the payor spouse or includible as income by the payee spouse.
  • Moving expenses and reimbursement – Except for members of the armed forces on active duty who move pursuant to a military order and incident to a permanent change of station, moving expense deductions would be repealed through 2025 under the new Act. The new Act would also exclude from gross income and wages for qualified moving expense reimbursements.

    San Francisco Tax Preparation

    Photo credit: david drexler via Foter.com / CC BY

  • IRA recharacterization – Taxpayers would be prevented from unwinding Roth conversions using recharacterization under the new Act, which excludes conversion contributions to Roth IRAs.
  • Individual mandate – Taxpayers who do not obtain insurance that provides at least minimum essential coverage will not be subjected to a penalty for tax years after 2018. 
  • Modification to kiddie tax – Under the new Act law, the taxable income of a child attributable to earned and unearned income is taxed under the rates for single individuals and trusts & estates, respectively. Under pre-act law, net unearned income (less some exemptions) of a child was taxed at the parents’ rates if the parents’ tax rates were higher than the tax rates of the child. 
  • Child tax credit – The child tax credit increases from $1,000 to $2,000 per qualifying child (maximum refundable amount of the credit is $1,400) and a new nonrefundable $500 credit for qualifying dependents who are not children is provided under the Act. The credit begins to phase-out at $400,000 for married filling joint taxpayers (increased from $110,000) and $200,000 for all other taxpayers (increased from $55,000 for married filing separate and $75,000 for all other taxpayers). 
  • Education provisions – Section 529 plans may not distribute more than $10,000 in expenses for tuition incurred during the tax year at an elementary or secondary school. The Act would also modify the exclusion of student loan discharges from gross income.
  • Doubled Exemption for Estate and Gift Tax. The exemption for estate and gift tax for estates of decedents dying and gifts made after December 31, 2017 and before January 1, 2026 would double from $5 million to $10 million (indexed for inflation occurring after 2011).

Obviously the law impacts many San Francisco Bay Area taxpayers. However, remember that it has move than the above-mentioned “moving parts.” Especially if you own a business here in San Francisco, and/or you work at a tech company and receive stock options, be sure to reach out to one of our tax accountants for a consultation. No two individual situations (or two businesses or corporations) are the same, and the best option is a thorough analysis of your income and assets. We can then advise on the best strategies to minimize taxation under the provisions of the law.


Photo credit: david drexler via Foter.com / CC BY

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