Tax Cuts and Jobs Act – Impact on 2017 tax returns

On December 22, 2017, the Tax Cuts and Jobs Act was signed into law and it most likely will have a significant impact on businesses, individuals and tax preparers in future tax years. Most of the changes in the tax code contained in the Tax Cuts and Jobs Act are not effective until 2018 or later.

For the upcoming tax season, the only significant change that should impact individuals filing Form 1040 for 2017 is a temporary reduction in the medical expense deduction floor for taxpayers that itemize their deductions on Schedule A. The deductibility for medical expenses threshold was set to be 10 percent of adjusted gross income for all taxpayers in 2017, but this threshold has been temporarily reduced for 2017 and 2018 to 7.5 percent. This reduction in the medical expense deduction floor will revert to 10 percent in 2019.

A second provision of the Tax Cuts and Jobs Act that may impact individuals and by extension tax preparers in future years involves the elimination of the Shared Responsibility Payment for individuals failing to maintain minimum essential coverage. The repeal of the individual mandate has been widely reported but preparers should be aware that although this individual mandate has been eliminated, this provision of the Tax Cuts and Jobs Act does not go into effect until 2019. This means that taxpayers should comply with the Shared Responsibility Payment when they file their returns for 2017 and 2018.