The AICPA Tax Reform Resource Center is your home for comprehensive coverage on tax reform. This page is your go-to for news, resources, videos, podcasts, learning and AICPA advocacy positions.
Many relief packages have been passed to help combat impacts related to the coronavirus (COVID-19). Learn about tax law changes and the various relief provisions.
Provides a brief summary of tax provisions contained in the CARES Act (H.R. 748) and the Families First Coronavirus Response Act (H.R. 6201), open to all AICPA members.
Stay up to date with the latest tax issues and keep your technical skills sharp with a wide range of learning opportunities.
Stay up to date with the latest developments in tax reform by listening to our featured video. Learn what is going on in Washington that may impact you and your clients, and what to expect with potential tax law changes. We will update our featured video frequently so you'll have the latest insight at your fingertips.
This series of frequently asked questions (FAQs) provides answers to questions we are hearing from our members about the Tax Cuts and Jobs Act (TCJA).
The proliferation of new income tax provisions since the 1986 tax reform effort has led to compliance hurdles for taxpayers, administrative complexity and enforcement challenges for the IRS. The AICPA encourages Congress to examine all aspects of the tax code to improve the current rules. We stand for a code that is simple, practical and administrable (AICPA Guiding Principles of Good Tax Policy). The AICPA has consistently supported tax reform simplification efforts because we are convinced such actions will significantly reduce taxpayers’ compliance costs and encourage voluntary compliance through an understanding of the rules.
Here are some highlights of the changes for individual taxpayers (from 2018 through 2025):
- The top individual rate is 37%.
- The individual AMT remains, but with increased exemption amounts and increased phase-out levels.
- The mortgage interest deduction limit is reduced to $750,000 on new mortgages ($375,000 for a married couple filing a separate return) and only home equity loan interest on loans used for home improvements or traced to business, investment or passive activity expenditures remains deductible (see Sec. 163(h), Regs. Sec. 1.163-8T and Notice 89-35).
- Individuals are allowed to deduct up to $10,000 in total state and local taxes, which include income or sales taxes plus property taxes. For state and local taxes previously deducted on Schedule C, E, or F, the limit does not apply.
- The child tax credit is increased to $2,000, with up to $1,400 refundable. The phase-out level is increased so more individuals with children under age 17 will qualify for the credit.
- Medical expenses in excess of 7.5% of adjusted gross income (AGI) are deductible in 2017 and 2018 and then 10% of AGI thereafter.
- There are no personal or dependent exemptions under the new tax law.
- No moving expenses are deductible (other than for U.S. armed forces members on active duty).
- No alimony is taxable or deductible starting in 2019 for agreements executed after 2018.
- No miscellaneous itemized deductions.
- No Pease phase-out of itemized deductions.
Yes, generally, it would be deductible (subject to the limitation cap).
From 2018 through 2025, qualified residence interest only includes acquisition debt (not home equity debt). If a home equity loan was used for improvements to the principal or second home and secured by that home, it is acquisition debt and the interest is deductible.
A revised limitation exists for acquisition debt. Such debt may not exceed $750,000. A grandfather provision exists for acquisition debt incurred before Dec. 15, 2017. A special rule also exists for refinancing.
To determine if interest on a home equity loan is deductible, apply the tracing rules of Regs. Sec. 1.163-8T as modified by Notice 89-35 (pay particular attention to the 30-day rule of the notice). If the loan was used for improvements to the principal or second residence and secured by that residence, it likely qualifies as acquisition debt (within the new dollar limits).
Listen to the podcast: Tax reform and itemized deductions: Mortgage interest. Also, view the IRS’s guidance and examples on the subject.
The corporate tax rate has been lowered to a flat 21%, effective in 2018. The legislation repeals the corporate alternative minimum tax (AMT) and provides for passthroughs a 20% deduction (known as the qualified business income or QBI deduction and claimed at the individual level rather than at the passthrough entity level). Every client’s situation is different. Therefore, it’s advisable to do an analysis for your business clients to help them determine if a change in entity structure is appropriate.
We’ve received questions from AICPA members about whether it might be better for CPA firms to organize as C corporations instead of passthroughs, given the lower corporate tax rate. We advise using extreme caution for two reasons: (1) switching could possibly raise taxes and (2) a firm could lose the benefit of the CPA brand.
Read the article: Switching to a C corp: Think twice about it for more guidance including different scenarios to consider.
Here are some highlights of the changes for businesses:
- The new corporate tax rate is a flat 21%.
- The corporate alternative minimum tax (AMT) is repealed.
- The deduction for business interest is limited to the sum of the following: business interest income, 30% of the adjusted taxable income (as defined in the new law), and the floor plan financing interest.
- The rules allow taxpayers to claim a 100% first-year depreciation deduction on qualified property that is acquired and placed in service after Sept. 27, 2017. A phase-out period will begin in 2023 and end in 2027.
- The rules disallow entertainment, leisure, amusement or recreation expenses.
- The rules repeal the carry back of net operating losses (NOLs) for years ending after 2017 and NOLs generated for years beginning after 2017 cannot reduce taxable income by more than 80%.
Download our tax reform changes chart for businesses to learn more.
A fiscal-year corporation should determine its federal income tax for years that include Jan. 1, 2018 by first calculating the tentative tax for the entire taxable year using the tax rates in effect prior to the Tax Cuts and Jobs Act (TCJA) and then also calculating the tentative tax for the entire taxable year using the new 21% rate. Subsequently, the corporation should proportion each tentative tax amount based on the number of days in the taxable year when the different rates were in effect. The sum of these two amounts is the corporation’s federal income tax for the fiscal year. Refer to Notice 2018-38 for details.
The transition tax is also commonly referred to as the repatriation tax or the Sec. 965 tax. In general, U.S. shareholders are required to pay a transition tax on the post-1986 untaxed foreign earnings and profits (E&P) of certain specified foreign corporations as if those E&P had been repatriated to the U.S.
To be subject to a Sec. 965 inclusion, a taxpayer must be a U.S. shareholder of a deferred foreign income corporation (DFIC). A DFIC is defined as a specified foreign corporation (SFC) in Sec. 965(e). That SFC must also have post-1986 accumulated E&P to be construed as a DFIC.
U.S. shareholders subject to a Sec. 965 inclusion fall into two categories of an SFC. The first category is U.S. shareholders of a controlled foreign corporation (CFC), as defined in Sec. 957(a). To be a CFC, more than 50% of the voting power of all classes of stock entitled to vote or 50% of the total value of all stock must be owned by U.S. shareholders. A U.S. shareholder, with respect to any foreign corporation, is a U.S. person (as defined in Sec. 957(c)) who owns (within the meaning of Sec. 958(a)) or is considered owning by applying the rules of ownership of Sec. 958(b), 10% or more of the total combined voting power of all classes of stock entitled to vote of such foreign corporation, or 10% or more of the total value of shares of all classes of stock of the foreign corporation.
The second category of U.S. shareholders subject to Sec. 965 inclusions are U.S. corporations that own any share of a foreign corporation, whether that corporation is controlled or not.
Estates, gifts and trusts
Eliminating the estate tax was high up on the Republican tax agenda and was part of the Republican Blueprint and the House Nov. 16, 2017 version of the Tax Cuts and Jobs Act (TCJA). However, the legislation, as passed by Congress and signed by the President (enacted on Dec. 22, 2017), does not eliminate the estate tax. Rather, the tax exemption amount is doubled for tax years 2018 through 2025 from $5.6 million to $11.18 million per person, indexed for inflation.
Yes. The new qualified business income (QBI) deduction under Sec. 199A applies to taxpayers other than C corporations; thus, the deduction is available to estates and trusts.
Qualified business income (QBI) deduction (Sec. 199A)
The qualified business income (QBI) deduction of Sec. 199A is limited to 20% of the excess of taxable income over net capital gain. For example, suppose a taxpayer has $100,000 of QBI, $120,000 of capital gain, and $40,000 of deductions. Taxable income in this example is $180,000, and the excess of taxable income of net capital gain is $60,000. Thus, the tentative tax deduction of $20,000 ($100,000 QBI x 20%) is limited to $12,000 ($60,000 x 20%).
If taxable income is less than $157,500 (single) or $315,000 (married), then the QBI deduction is simply 20% of the lesser of QBI or taxable income other than capital gain (subject to the taxable income limitation), regardless of whether the business is a specified service business (SSTB) or whether the business pays W-2 wages.
If taxable income is greater than $207,500 (single) or $415,000 (married), and the QBI is from a SSTB, the QBI deduction is $0. However, if the taxpayer has QBI from other sources, a deduction is still allowed for the non-SSTB businesses. If the QBI is from a non-SSTB, the deduction is allowed, but is limited to the greater of:
- 50% of the taxpayer’s allocable share of the W-2 wages paid by the business, or
- 20% of the taxpayer’s allocable share of the W-2 wages paid by the business plus 2.5% of the taxpayer’s allocable share of the unadjusted basis of qualified property.
If the taxable income is between $157,500 and $207,500 (single) or $315,000 and $415,000 (married), both the prohibition on SSTBs and the W-2 and property limitations partially apply. See our Sec. 199A flowchart and listen to the podcast: Tax reform: Sec. 199A final regulations.
SSTBs include “any trade or business involving the performance of services in the fields of health, law, accounting, actuarial science, performing arts, consulting, athletics, financial services, brokerage services, or any trade or business where the principal asset of such trade or business is the reputation or skill of one or more of its employees or owners; or any trade or business which involves the performance of services that consist of investing and investment management, trading, or dealing in securities, partnership interests or commodities.” Engineering and architectural businesses are specifically removed from the definition of an SSTB.
The final regulations retain and slightly reword the definition of a trade or business set forth in the proposed regulations. Specifically, a trade or business is defined as a trade or business under Sec. 162 other than the trade or business of performing services as an employee. The final regulations also provide further interpretation of the disqualified fields.
The final regulations, similar to the proposed regulations, provide a de minimis exception that allows a business that has gross receipts of $25 million or less for the tax year to not be treated as an SSTB as long as less than 10% of the gross receipts of the business are attributable to the performance of services in one of the disqualified fields.
Listen to the podcast: Tax reform: Sec. 199A final regulations.
The AICPA is committed to being your home for all guidance and resources related to tax reform. Below are a variety of resources and other tools to keep you informed.
Guides, Podcasts and Templates
CARES Act, 2020, H.R. 748, and Families First Coronavirus Response Act, 2020, H.R. 6201
- Coronavirus (COVID-19) Tax Resources (open to AICPA)
Further Consolidated Appropriations Act, 2020, H.R. 1865
- 2019 Annual Tax Compliance Kit Addendum (open to AICPA)
- SECURE Act Podcast: Practical Solutions for Your Clients (open to everyone)
- Traditional IRA RMD Flowchart (open to Tax Section and PFP Section)
Tax Cuts and Jobs Act (TCJA)
- Sec. 199A Flowchart (open to Tax Section)
- Sec. 199A QBI Supplement (open to Tax Section)
- Tax Reform Changes Chart for Businesses (open to Tax Section, PFP Section and PCPS)
- Tax Reform Changes Chart for Individuals (open to Tax Section, PFP Section and PCPS)
- Tax Reform Podcast Library (open to everyone with some podcasts locked to Tax Section)
- Tax Reform Quick Reference Guide (open to Tax Section and PFP Section)
- TCJA Supplement (open to Tax Section)
- Tax Reform Planning Letter for Businesses (open to Tax Section, PFP Section and PCPS)
- Tax Reform Planning Letter for Individuals (open to Tax Section, PFP Section and PCPS)
- Tax Reform PowerPoint Presentation for Businesses (open to everyone)
- Tax Reform PowerPoint Presentation for Individuals (open to everyone)
- Tax Reform Snapshot for Clients (open to Tax Section, PFP Section and PCPS)
- Impact of Tax Reform on Planning Toolkit (open to everyone with some resources locked to PFP Section)
- Personal Financial Planning Podcast Library (open to everyone)
IRS Guidance and Resources
Read up-to-the-minute news articles and blogs published in the Journal of Accountancy, The Tax Adviser, AICPA Insights Blog, Tax Section Newsletter and The CPA Advocate — AICPA's premier publications that provide superior content for today's CPA.
- AICPA posts 20 FAQs on tax filing relief, The Tax Adviser, April 8, 2020
- Social Security recipients will automatically receive stimulus payments, The Tax Adviser, April 2, 2020
- Employer tax credits form, employee retention credit guidance posted, The Tax Adviser, April 1, 2020
- CARES Act tax provisions aim to stabilize pandemic-ravaged economy, The Tax Adviser, March 27, 2020
It's important for CPAs to stay up to date with legislative changes, the dynamic political environment and the profession's tax reform advocacy efforts. Our tax leadership and dedicated AICPA staff are regularly involved in a wide range of tax policy and advocacy activities, including discussions with Congressional offices, Treasury officials, IRS executives and key stakeholders. Using AICPA’s Principles of Good Tax Policy as our foundation, we also regularly submit comments, including the following submissions that provide valuable suggestions on ways to improve our tax system:
- AICPA Urges Treasury Secretary and IRS Commissioner for Filing Season Relief, April 7, 2020
- AICPA Comment Letter for the Relief for Taxpayers Affected by Ongoing Coronavirus Disease 2019 Pandemic, March 26, 2020
- ICPA Letter of Support for Tax Filing Relief for America Act, March 19, 2020
- AICPA Comments on BEAT Regulations, March 11, 2020
- AICPA Comments on Section 199A, March 4, 2020
- AICPA Comment Letter on The Freedom to Invest in Tomorrow’s Workforce Act (H.R. 5339), March 2, 2020
This page is sponsored by the AICPA Tax Section. The AICPA Tax Section is the go-to source for tax practitioners to elevate both their practice and professional development. We give our members the tools they need to keep up with ever-changing tax laws and trending issues and maintain the highest ethical standards so they can be the most trusted advisers for tax and financial planning.
Reviewed April 8, 2020