2018 Tax Cuts and Jobs Act Highlights

Individual Tax Provisions:

Pile of Tax Cuts And Jobs Act Buttons With US Flag

New Tax Rates and Brackets: For tax years 2018-2025, seven tax brackets apply for individuals: 10%, 12%, 22%, 24%, 32%, 35%, and 37%. For tax years 2018-2025, the taxable income of a child attributable to earned income is taxed under the rates for single individuals, and taxable income of a child attributable to net unearned income is taxed according to the brackets applicable to trusts and estates. This rule applies to the child’s ordinary income and his or her income taxed at preferential rates. The new law leaves the preferential rates on capital gains and dividends unchanged.

Personal Exemption Deduction Eliminated: Under pre-act law, the deduction for each personal exemption was $4,150 for 2017, subject to a phaseout for higher earners. For tax years 2018-2025, the deduction for personal exemptions is eliminated.

Standard Deduction Increased: For tax years 2018-2025, the standard deduction is increased to $24,000 for married individuals filing a joint return, $18,000 for head-of-household filers, and $12,000 for all other taxpayers, adjusted for inflation in tax years after 2018. No changes are made to the current-law additional standard deduction for the elderly and blind.

Medical Expense Deduction Threshold Temporarily Reduced: For tax years 2017-2018, the threshold for medical expense deductions is reduced from 10%-of-AGI to 7.5%-of-AGI for all taxpayers. In addition, the rule limiting the medical expense deduction for Alternative Minimum Tax (AMT) purposes to the excess of such expenses over 10%-of-AGI doesn’t apply to those tax years.

State and Local Tax and Property Deduction Limited to $10,000: For tax years 2018-2025, a taxpayer’s itemized deduction for state and local taxes is limited to $10,000 ($5,000 for a married taxpayer filing a separate return) of the aggregate of (1) state and local property taxes and (2) state and local income, war profits, and excess profits taxes (or sales taxes in lieu of income, etc. taxes) paid or accrued in the tax year. Warning: The provision also includes a rule stating that an individual may not claim an itemized deduction in 2017 on a pre-payment of income tax for a future tax year in order to avoid the dollar limitation applicable for tax years beginning after 2017. It’s interesting to note that on December 22nd New York’s Governor Cuomo signed an emergency Executive Order that allows New Yorkers to prepay next year’s property taxes this year, before the new tax law takes effect. Payments must be postmarked by December 31, 2017. The order authorizes localities to issue warrants for the collection of early property tax payments and to accept partial payment— allowing New Yorkers to pay a portion or all of their 2018 property taxes before the end of the year to keep the deductibility.

Mortgage and Home Equity Indebtedness Interest Deduction Limited: For tax years 2018- 2025, the deduction for interest on home equity indebtedness is eliminated and the deduction for mortgage interest is limited to underlying indebtedness of up to $750,000 ($375,000 for married taxpayers filing separately).

Charitable Contribution Deduction Limitation Increased: For contributions made in tax years after 2017, the 50% limitation for cash contributions to public charities and certain private foundations is increased to 60%. Contributions exceeding the 60% limitation are generally allowed to be carried forward and deducted for up to five years, subject to the later year’s ceiling. Charitable Contribution Deduction for College Athletic Seating Rights Eliminated. For tax years after 2017, no charitable deduction will be allowed for any payment to an institution of higher education in exchange for the right to purchase tickets or seating at an athletic event.

Casualty and Theft Loss Deduction Eliminated: For tax years 2018-2025, the personal casualty and theft loss deduction is eliminated, except for personal casualty losses incurred in a federally declared disaster. However, where a taxpayer has personal casualty gains, the loss suspension doesn’t apply to the extent that such loss doesn’t exceed gain. Note: The ACT includes special relief provisions for tax years 2018-2025 for taxpayers who incurred losses from certain 2016 major disasters.

Gambling Loss Limitation Modified: For tax years 2018-2025, the limitation on wagering losses is modified to provide that all deductions for expenses incurred in carrying out wagering transactions, and not just gambling losses, are limited to the extent of gambling winnings.

Miscellaneous Itemized Deductions Eliminated: For tax years 2018-2025, the deduction for miscellaneous itemized deductions that are subject to the 2% floor is eliminated.

“Pease” Limitation on Itemized Deductions Eliminated: Under pre-act law, higher-income taxpayers who itemized their deductions were subject to a limitation on these deductions (commonly known as the “Pease limitation”). For tax years 2018-2025, the “Pease limitation” on itemized deductions is eliminated.

Income and Losses New Deduction for Business Income from Pass-through Entities and Sole Proprietorships: This gets tricky but here goes. For tax years 2018-2025, an individual generally may deduct 20% of qualified business income from a partnership, S corporation, or sole proprietorship. The 20% deduction is not allowed in computing Adjusted Gross Income (AGI), but rather is allowed as a deduction reducing taxable income. Alas, the deduction comes with numerous restrictions:

  • For the most part, this deduction cannot exceed 50% of your share of the W-2 wages paid by the business. Alternatively, the limitation can be computed as 25% of your share of the W-2 wages paid by the business, plus 2.5% of the unadjusted basis (the original purchase price) of property used in the production of income.
  • The W-2 limitations do not apply if you earn less than $157,500 (if single; $315,000 if married filing jointly).
  • Certain personal service businesses are not eligible for the deduction, unless their taxable income is less than $157,500 for singles and $315,000 if married. In this regard, a “specified service trade or business” means any trade or business involving the performance of services in the fields of health, law, 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 which involves the performance of services that consist of investing and investment management trading, or dealing in securities, partnership interests, or commodities.

The exception to the W-2 limit and the general dis-allowance of the deduction to personal service businesses is phased out over a range of $50,000 of income for single taxpayers and $100,000 for married taxpayers filing jointly. Thus, by the time income for a single taxpayer reaches $207,500 or $415,000 for a married-filing-jointly taxpayer, the W-2 limitation will apply in full (i.e. personal service professionals get no deduction).

Alimony Deduction by Payor and Income Inclusion by Payee Repealed: For any divorce or separation agreement executed after 2018, or executed before that date but modified after it (if the modification expressly provides that the new amendments apply), alimony and separate maintenance payments are not deductible by the payor spouse and are not included in the income of the payee spouse.

Moving Expense Deduction and Reimbursements Eliminated: For tax years 2018-2025, the deduction for moving expenses and the income exclusion for qualified moving expense reimbursements is eliminated, except for members of the Armed Forces on Active duty (and their spouses and dependents) who move pursuant to a military order and incident to a permanent change of station.

Alternative Minimum Tax (AMT) Retained with Increased Exemption Amounts: The act retains the individual AMT but with increased exemption amounts and phase-out thresholds for years 2018-2025 (indexed for inflation). There are now higher exemption amounts ($109,400 for married taxpayers as compared to $84,500 under current law). In addition, with the deduction for state and local income taxes largely eliminated, as well as the deductions for unreimbursed employee expenses and personal exemptions, the AMT should catch in its web fewer taxpayers then it does under current law.

Child Tax Credit Increased: For tax years 2018-2025, the child tax credit is increased from $1,000 to $2,000 per qualifying child under the age of 17, and other changes are made to phase-outs and refund ability during this same period. Under the act, the income level at which the credit phases out are increased to $400,000 for married taxpayers filing jointly ($200,000 for all other taxpayers).

Education Incentives: Under current law, a taxpayer who pays tuition to a college or university may be eligible for a Lifetime Learning Credit, a Hope Credit, or an American Opportunity Tax Credit, depending on the facts and circumstances. In addition, employers may pay up to $5,250 on behalf of an employee to obtain work-related education without the payment being included in the taxable income of the employee, PhD candidates may receive tax-free tuition waivers, dependents of college or university employees may also receive tax-free tuition waivers, a deduction is permitted for student loan interest of up to $2,500 and K-12 teachers may deduct up to $250 of their out-of-pocket supplies.

529 Accounts: These plans can now be used to pay for private elementary and secondary school expenses, whether the schooling is public, private (not including homeschooling) or religious. However, the tax-free treatment of such 529 withdrawals will be limited to $10,000 per student, per year.

Exclusion on Sale of Primary Residence Despite heated discussion on changes, the new law continues the law that a taxpayer who sells his or her home may exclude up to $250,000 of gain ($500,000 if married filing jointly), provided the taxpayer has owned and used the home as his or her primary residence for two of the previous five years.

Affordable Care Act Individual Mandate Repealed: Under pre-act law, the Affordable Care Act required individuals, who were not covered by a health plan that provided at least minimum essential coverage, to pay a “shared responsibility payment” (also referred to as a penalty) with their federal tax return ($695 for 2018). Unless an exception applied, the tax was imposed for any month that an individual did not have minimum essential coverage. For months beginning after 2018, the amount of the individual shared responsibility payment is permanently reduced to zero.

Re-characterization of Roth Conversions Eliminated: For Roth conversions in tax years beginning after 2017, the act repeals the special rule that allows IRA contributions to one type of IRA (either traditional or Roth) to be re-characterized as a contribution to the other type of IRA. Thus, re-characterization cannot be used to unwind a Roth conversion, but is still permitted with respect to other contributions.

Estate and Gift Tax Retained with Increased Exemption Amount For estates of decedents dying and gifts made after 2017 and before 2026, the act doubles the base estate and gift tax exemption amount from $5 million to $10 million. The $10 million amount is indexed for inflation occurring after 2011 and is expected to be approximately $11.2 million in 2018 ($22.4 million per married couple). Many of our wealthier clients have been postponing certain lifetime estate planning initiatives due to the legislative uncertainty and the act now provides some clarity. However, many of the new law’s provisions expire at the end of 2025. Remember the “fiscal cliff” situation at the end of 2012 where estate tax exemptions were scheduled to revert back to lower figures. The prospect of this sunset will unfortunately cause there to be some continued level of uncertainty as it relates to gifting for federal estate tax planning purposes after 2025.

Business Corporate and Nonprofit organizations Tax Provisions: C Corporation Tax Rates lowered. For tax years beginning after 12/31/17, the act lowers the corporate tax rate to a flat 21%. This applies to personal service corporations as well. According to the GOP, a significantly lower corporate tax rate is needed to promote economic growth and global competitiveness.

Dividends Received Deduction Corporations are generally permitted a special deduction for dividends received. If the corporation owns at least 20% of another corporation, an 80% dividend received deduction is permitted. Otherwise, the deduction is limited to 70%. If the payor and recipient corporations are members of the same affiliated group, a 100% dividend received deduction is allowed. Under the act, the 80% dividends received deduction is reduced to 65%, and the 70% deduction is reduced to 50%. This applies to tax years beginning after 12/31/17.

Alternative Minimum Tax (AMT): The act repeals the corporate AMT for tax years beginning after 12/31/17. For tax years beginning after 2017 and before 2022, the AMT credit is refundable and can offset regular tax liability in an amount equal to 50% (100% for tax years beginning in 2021) of the excess of the minimum tax credit for the year over the amount of the credit allowable for the year against regular tax liability. This means the full amount of the minimum tax credit will be allowed in tax years beginning before 2022.

Expensing and Depreciating Property (Section 179): Under pre-act law, the maximum Section 179 deduction was scheduled to be $520,000 for 2018. In addition, the qualifying property phase-out threshold was scheduled to be $2,070,000. The act increases the maximum Section 179 deduction and phase-out threshold to $1 million and $2.5 million, respectively, for property placed in service in tax years beginning after 12/31/17. The act also expands the definition of Section 179 property to include certain tangible personal property used predominantly to furnish lodging and certain improvements to nonresidential real property such as roofs, HVAC, fire protection, alarm and security systems.

Immediate Expensing of Qualifying Business Assets: The act establishes a 100% first-year deduction for qualified property acquired and placed in service after 9/27/17 and before 1/1/23 (1/1/24 for certain property with longer production periods). This applies to new and used property. In later years, this first-year deduction phases down as follows: • 80% for property placed in service in 2023. • 60% for property placed in service in 2024. • 40% for property placed in service in 2025. • 20% for property placed in service in 2026. Note: For qualifying property placed in service after 9/27/17, business owners can take advantage of this provision on their 2017 tax returns. Or, under a first-year transition rule, they can stick with current law and claim 50% bonus depreciation.

Increased Luxury Automobile Depreciation Limits: There are limits for the annual amount of depreciation that can be claimed for passenger autos. For passenger autos placed in service after 12/31/17 for which bonus depreciation is not claimed, the maximum amount of allowable depreciation is increased to $10,000 for the placed-in-service year, $16,000 for the second year, $9,600 for the third year, and $5,760 for the fourth and later years. For passenger autos eligible for bonus first-year depreciation, the increase to the first-year depreciation limit remains $8,000.

Shortened Recovery Period for Real Property: For property placed in service after 12/31/17, the separate definitions of qualified leasehold improvement, qualified restaurant, and qualified retail improvement property are eliminated. The act requires any real property trade or business that elects to be excluded from the interest deductibility limitations must utilize the alternative depreciation system (ADS) with respect to its depreciable real property. The act imposes a general 15-year recovery period (20 years for ADS) for qualified improvement property.
In addition, the ADS recovery period for residential rental property is shortened from 40 to 30 years.

Interest Expense Limited: Regardless of its form, every business will be subject to a net interest expense disallowance. For tax years beginning after 12/31/17, net interest expense in excess of 30% of the company’s adjusted taxable income will be disallowed. However, taxpayers (other than tax shelters) with average annual gross receipts for the prior three years of $25 million or less are exempt from this limitation. The amount of any business interest not allowed as a deduction for any taxable year may be carried forward indefinitely and utilized in future years, subject to this and other applicable interest deductibility limitations and to certain restrictions applicable to partnerships.

Net Operating Loss (NOL) The act generally repeals the two-year carryback rule for NOLs. For losses arising in tax years beginning after 12/31/17, the NOL deduction is limited to 80% of taxable income. NOLs can be carried forward indefinitely.

Domestic Manufacturing Deduction Repealed: Section 199 allows a deduction equal to a percentage of the income earned from certain manufacturing and other production activities conducted within the U.S. For tax years beginning after 12/31/17, the Section 199 deduction is repealed.

Like-kind Exchanges Limited to Real Property (Section 1031): The act limits the like-kind exchange rules so they apply only to real property that is not held primarily for sale.

Research and Experimental Expenses: For amounts paid or incurred in tax years beginning after 12/31/21, the act requires specified research and experimental (R&E) expenses to be capitalized and amortized ratably over five years or 15 years if R&E is conducted outside of the U.S. Specified R&E expenses include costs for software development.

Deduction for Fringe Benefits: The act makes the following adjustments to the fringe benefit rules (for amounts paid or incurred after 12/31/17): • Disallows deductions for entertainment, amusement, or recreation activities expenses. The denied deductions would also include any membership dues, fringe benefits provided to employees in the form of an on-premises gym, and other athletic facilities. It also expands the current 50% limit on the deductibility of business meals to those provided in an in-house cafeteria or otherwise on the employer’s premises. For amounts paid or incurred after 12/31/25, the act disallows an employer’s deduction for expenses associated with meals provided for the convenience of the employer on its business premises, or provided on or near the employer’s business premises through an employer-operated facility that meets certain requirements.

Denies a deduction for employee transportation fringe benefits: However, the act retains the exclusion from income for such benefits received by an employee. Eliminates a deduction for transportation expenses that are the equivalent of commuting for employees, except as provided for the safety of the employee.

New Credit for Employer-paid Family and Medical Leave For tax years beginning after 12/31/17 and before 1/1/20, the act allows businesses to claim a general business credit equal to 12.5% of the amount of wages paid to qualifying employees during any period in which such employees are on family and medical leave if the rate of payment is 50% of the wages normally paid to an employee. The credit is increased by 0.25 percentage points (but not above 25%) for each percentage point by which the rate of payment exceeds 50%. All qualifying full-time employees have to be given at least two weeks of annual paid family and medical leave.

Expansion of Cash Method of Accounting: For tax years beginning after 12/31/17, the cash method may be used by taxpayers (other than tax shelters) that satisfy a $25 million gross receipts test, regardless of whether the purchase, production, or sale of merchandise is an income producing factor. In addition, such taxpayers are not required to account for inventories. Instead, they may treat inventories as non-incidental materials and supplies or conform to their financial accounting treatment of inventories.

Long-term Construction Contracts: Generally, construction companies with average annual gross receipts of $10 million or less in the prior three years are exempt from the Percentage of Completion Method (PCM). The act expands this exemption to contracts for the construction or improvement of real property if the contract (1) is expected to be completed within two years and (2) is performed by a taxpayer that meets the $25 million gross receipts test discussed earlier. This change is effective for contracts entered into after 12/31/17.

As you can see, the act is going to bring a lot of changes to individual and business taxpayers. On the plus side, this means more planning opportunities for many as we all try to navigate through uncertain territory. This blog only touches the surface of one of the biggest tax overhauls in the nation’s history. If you need help with your taxes or have any questions please call Gregory J. Spadea at 610-521-0604. The Law Offices of Spadea & Associates, LLC prepares tax returns year round and is conveniently located in Ridley Park, Pennsylvania.

Who Are Your Legal Children under the Pennsylvania Laws of Intestacy

Paper chain family

If you die without a will in Pennsylvania, your children will receive an “intestate share” of your property. The size of each child’s share depends on how many children you have and whether or not you are married.

For children to inherit from you under the laws of intestacy, the Commonwealth of Pennsylvania must consider them your children, legally. For most families, this is not a confusing issue. But it’s not always clear. Here are some things to keep in mind.

  • Adopted children: Children you legally adopted will receive an intestate share, just as your biological children do.
  • Foster children and stepchildren: Foster children and stepchildren you never legally adopted will not automatically receive a share.
  • Children placed for adoption: Children you placed for adoption and who were legally adopted by another family will not receive a share. However, if your biological children were adopted by your spouse, that would not affect their intestate inheritance. (20 Pa. Cons. Stat. § 2108.)
  • Other relatives placed for adoption: A relative other than your child, for example, your grandchild who was legally adopted by another family may receive a share of your estate if the relative would otherwise be entitled to inherit from you and you have “maintained a family relationship.” (20 Pa. Cons. Stat. § 2108.)
  • Posthumous children: Children conceived by you but not born before your death will receive a share. (20 Pa. Cons. Stat. § 2104.)
  • Children born outside of marriage: If you were not married to your children’s mother when she gave birth to them, they will receive a share of your estate if (1) you and their mother get married later, (2) you acknowledged your paternity, or (3) your paternity is otherwise proved under Pennsylvania law. (20 Pa. Cons. Stat. § 2107.)
  • Children born during your marriage: Any child born to your wife during your marriage is assumed to be your child and will receive a share of your estate.
  • Grandchildren: Your grandchildren will receive a share only if their parent (your child) predeceases you.

If you have any questions regarding Pennsylvania Intestacy Laws contact Gregory J. Spadea at 610-521-0604. The Law Offices of Spadea & Associates, LLC specializes in Probate, Estate Administration and Estate Litigation.

7 Clauses Every Pennsylvania Landlord Should Include In Their Lease

Lease Agreement

I have had many clients that are landlords over the years and have witnessed them make the same mistakes that could have easily have been avoided. Therefore I created the following list so you can avoid these mistakes. Carefully screen all prospective tenants thoroughly which means have them fill in a rental application and pay a nonrefundable application fee. You can download or print a rental application from our website resource page at no charge. Use the nonrefundable application fee to order criminal background checks and credit reports. If the credit score is under 620 and the tenant can explain why it is under 620 such as a divorce, you can request that they get someone with a higher credit score to cosign the lease for the first two years. Contact the tenant’s current employer for the last 5 years to verify their work history and salary. Once you have thoroughly screened the prospective tenant you need a good lease to protect yourself.

A great lease should contain the following 7 Clauses:

  1. Waive the notice to quit time requirements;
  2. Require 90 days notice to terminate the lease;
  3. Contain Act 215 language allowing the landlord to garnish the tenants wages up to 10% of his gross pay;
  4. Have an abandoned property clause so the landlord does not have to pay storage fees when a tenant leaves abandoned property;
  5. Require tenants to have renters insurance and name the Landlord as the loss payee;
  6. If litigation ensues have a clause requiring the losing party to pay the winning parties legal fees;
  7. Get an adequate security deposit of at least one month’s rent and get additional deposits for pets or additional tenants.

In addition to having a good lease if the rental property is in your individual name you should purchase personal umbrella insurance to protect your other assets. If you own more than one rental property you should make the appropriate tax election to treat all of all rental property activity as a single rental real estate activity to meet the active participation requirements of the passive activity loss rules. The Law Offices of Spadea & Associates, LLC would be happy to help you make the proper tax elections and provide you with a great lease so you can avoid costly mistakes. Call Gregory J. Spadea at 610-521-0604 from the Law Offices of Spadea & Associates, LLC in Ridley Park.

11 Exceptions Where the IRS May Waive the 60 Day Deadline for IRA Rollovers

Internal Revenue Service sign.

The IRS gives you 60 days to rollover an Individual Retirement Account (IRA) into another IRA or qualified plan. However, if you fail to rollover the IRA in 60 days or fail to qualify for the waiver, the entire distribution will be taxable and you may be subject to an additional 10% penalty if you are under 59½ years old. Fortunately, there are 11 exceptions where the IRS will waive the 60 day rule and give you additional time to make the Rollover contribution. To qualify for the waiver the IRS must not have previously denied a waiver request with respect to a rollover of all or part of the distribution to which the contribution relates. In addition you must submit written certification to a plan administrator or IRA trustee within 30 days after being able to make the rollover contribution. If you miss the 60 day deadline because of one of the 11 reasons listed below the IRS will issue a waiver and allow you to make the rollover contribution beyond the 60 days.

To qualify you must have missed the 60-day deadline because of your inability to complete a rollover due to one or more of the following 11 reasons:

  1. An error was committed by the financial institution making the distribution or receiving the contribution.
  2. The distribution was in the form of a check and the check was misplaced and never cashed.
  3. The distribution was deposited into and remained in an account that you mistakenly thought was a retirement plan or IRA.
  4. Your principal residence was severely damaged.
  5. One of your family members died.
  6. You or one of my family members was seriously ill.
  7. You were incarcerated.
  8. Restrictions were imposed by a foreign country.
  9. A postal error occurred.
  10. The distribution was made on account of an IRS levy and the proceeds of the levy
    have been returned to you.
  11. The party making the distribution delayed providing information that the receiving plan or IRA required to complete the rollover despite your reasonable efforts to obtain the information.

If you missed the 60 day deadline on your IRA rollover and think you qualify under any of the 11 exceptions listed please call Gregory J. Spadea at 610-521-0604.

3 Rules To Follow If You Are Stopped For DUI or DWI in Pennsylvania

Drunk Driver being pulled over by police.

Even people with high alcohol tolerances can drink too much and find themselves in a situation where police stop their car for suspicion of driving under the influence (DUI) or Driving While Intoxicated (DWI). In these situations it is important that a person remember three basic rules: (1) don’t refuse a Breathalyzer Test, (2) don’t answer any questions even if the officer threatens to arrest you, and (3) tell the police officer about any physical limitations and injuries which would affect your balance or movement.

  1. Don’t refuse a Breathalyzer Test

    In Pennsylvania, everyone who drives a car on the road has given police implied consent to conduct a Breathalyzer Test. If you refuse the breathalyzer, Pennsylvania Department of Transportation (PENDOT) can still suspend your driver’s license for 12 to 18 months even if you’re not convicted in criminal court. The reason is because driving is a privilege in Pennsylvania and PENDOT can impose a suspension through its administrative powers which are separate from criminal proceedings. Therefore even if your attorney wins your DUI case, PENDOT can still suspend your driver’s license.

    If you take the Breathalyzer Test you will not only avoid a potential civil penalty from PENDOT but it can also improve your criminal case. A good attorney can dispute the results of a Breathalyzer because there are a number of issues can affect a BAC reading.

  2. Don’t Answer Any Questions

    If you are stopped for suspicion of DUI, police more than likely are going to arrest you no matter what you tell them. A typical question from a police officer is “have you had anything to drink tonight?” People will tell the officer they are coming from a friend’s house and just had one drink. However they are better off telling the officer that they aren’t going to answer any questions but that he is free to give a Breathalyzer Test or a Field Sobriety Test. Police officers are trained in the law and understand that everyone has the constitutional right to remain silent. Most police officers will respect this right and simply continue with the traffic stop by giving you a field sobriety test or taking you into custody.

    Keep in mind you could be arrested for a DUI even if you are not driving. If you have actual, physical control of a vehicle while under the influence, then that can be enough for an officer to arrest you. In Pennsylvania, the terms “operating” and “actual physical control” are basically the same. They generally mean that the driver is in the vehicle and could make it move, even if the driver is not trying to move the care when the officer finds him. Therefore, telling the officer why you were sleeping in the car while the radio and the heat are on will not help your case.

    Answering questions will never improve your DUI case because the officer is probably asking the question because he either smells alcohol on your breath or observed your car swerving or violating some traffic law. This is what gave the officer probable cause or reasonable suspicion to stop your car in the first place. If you answer a question it will only hurt your DUI case because you’ve given the police more circumstantial and possible direct evidence of your intoxication. A statement like “I only had a little to drink,” or “I am coming from a party,” can persuade a judge that the police officer had probable cause to arrest you. It’s always better to remain silent and simply cooperate with the police officer with regards to field sobriety tests, Breathalyzer Tests, and blood tests, but never make any verbal or written statements.

  3. Tell the Police Officer about any Physical Limitations You’ve Had in the Past

    A standard field sobriety test requires that a person perform certain movements so that a police officer can assess a person’s motor skills. These tests, however, are often difficult to perform even for a person who has not consumed any alcohol. There are three standard field sobriety tests – (1) the walk and turn, (2) the one leg stand test, and (3) the Horizontal Gaze Nystagmus (HGN) test.

    1. The first two tests require you to walk on a straight line or balance on one foot. If you’ve had any type of surgery, played sports, or have any knee or leg injuries this will affect your ability to perform these tests correctly. Telling the officer that you’ve had an injury in the past will put the police, the prosecution, and the court on notice that the results of the field sobriety test may not be a fair indication of your intoxication. This will also allow your criminal defense lawyer to argue that the police didn’t have probable cause to arrest you based on the results of the field sobriety test.

      With regards to the HGN Test, police officers are trained in the law but there is a great deal of case law which says that they can’t fairly use the results of the HGN Test to determine a person’s impairment. HGN is the involuntary jerking of the eyes and there is a strong argument that only a medical professional can accurately assess the real results of this test.

      If you are stopped for DUI it’s important to keep these three rules in mind because it will not only protect your rights but put your attorney in the best position to successfully defend your case. If you have questions call Gregory J. Spadea at 610-521-0604.

Seasons Greetings and Happy New Year!

Seasons Greetings and Happy New Year!

What is The Kiddie Tax and When Do Parents Pay Tax on Their Child’s Investment Income

Person calculating taxes

Special tax rules apply to children under the age of 24 who receive investment income over $2,100. Investment income generally includes interest, dividends and capital gains. Congress enacted the Kiddie tax to prevent parents from shifting investment income to their dependent children.

The so-called Kiddie Tax rules may affect the amount of tax and how to report the income. Specifically, a child’s investment income in excess of the applicable annual threshold $2,100 in 2017, is taxed at the parents rate. For example the first $1,050 of the child’s unearned income is not taxable. The next $1,050 is taxed at the child’s tax rate which is typically 0% on long-term capital gains and dividends and interest. The amount over $2,100 is taxed at the parent’s marginal federal income tax rates typically 15% on long-term capital gains and dividends and up to 39.6% on ordinary income. Note that between ages 19 and 23, the Kiddie Tax is only an issue if the child is a student, and the child’s earned income didn’t exceed one-half of the child’s own support for the year, excluding scholarships. The year the child turns age 24 and for all subsequent years, the Kiddie Tax ceases to apply.

Parents may include your child’s investment income on your tax return if it was less than $10,500 for the year. If you make this choice, your child will not have to file his or her own tax return and the parent would include IRS Form 8814, Parents’ Election to Report Child’s Interest and Dividends with their 1040.

If your child’s investment income was $10,500 or more in 2017 then the child must file IRS Form 8615 with their own return.

Although you will escape the Kiddie Tax after your child turns 24, there is another deadline if you set up a Coverdell Education Savings Account (CESA) for a child or grandchild. THE CESA must be liquidated within 30 days after your child turns 30 years old. To the extent earnings included in a distribution are not used for qualified higher education expenses, they are subject to federal income tax plus a 10% penalty tax. Alternatively, the CESA balance can be rolled over tax-free into another CESA set up for a younger family member under the age of 30.

If you have any questions about the Kiddie tax or taxes in general call Gregory J. Spadea at 610-521-0604.

How Much Can I Deduct For a Business Car or Truck in 2017 under IRC Section 179

A row of shiny new trucks parked at a car dealership.

To encourage businesses to buy equipment as well as cars and trucks Congress passed Internal Revenue Code (IRC) Section 179. For passenger vehicles, trucks, and vans with a gross weight of less than 6,000 pounds that are used more than 50% in a qualified business use, the total deduction for depreciation including both the Section 179 expense deduction as well as 50% Bonus Depreciation is limited to $11,160 for cars and $11,560 for trucks and vans. Keep in mind you only get bonus depreciation on new vehicle purchases.

For example if the car cost $30,000 and is used 100% for business, the business would get an IRC Section 179 deduction of $11,160 and a regular depreciation deduction of $3,768 (20% of the $18,840.00 difference). Therefore, you can deduct up to $14,928 if you buy a new car and use it 100% for business. If the vehicle is used less than 100% for business both the Section 179 deduction and regular depreciation deduction are reduced proportionately based on the actual business use percentage.

SUV’s, trucks and vans with a gross vehicle weight rating above 6,000 pounds but no more than 14,000 pounds qualify for expensing up to $25,000 if the vehicle is financed and placed in service prior to December 31. In addition, the business can deduct 50% of the remaining cost over $25,000 as bonus depreciation, but that only applies to new vehicle purchases.

For example, a new heavy SUV used 100% for business that costs $52,000 and qualifies for Section 179 could be written-off in 2017 as follows:

  • First Year Section 179 Deduction: $ 25,000
  • Bonus Depreciation (50% of remaining balance): $13,500
  • Regular Depreciation (20% of remaining balance): $2,700
  • Total First-Year Write-Off: $ 41,200

Keep in mind that businesses that experience net operating losses cannot claim an IRC Section 179 deduction that would create or increase an overall business tax loss. However they may take the 50% bonus depreciation deduction, and carry the remaining net operating loss forward where it can be used in future years.

Note that under the Protecting Americans from Tax Hikes Act of 2015, bonus depreciation is scheduled to be reduced to 40% in 2018 and 30% in 2019 before it expires on December 31, 2019.

Here’s a list of 2016 model cars with a gross weight over 6,000 lbs. Usually a vehicle will have its weight listed on the side door. If you’re unsure, just ask the dealer.

  • Audi Q7 3.0L TDI
  • BMW X5 XDRIVE35I and X6 XDRIVE35I
  • BMW Buick ENCLAVE
  • Cadillac ESCALADE AWD
  • Chevrolet Truck AVALANCHE 4WD
  • Chevrolet Truck SILVERADO
  • Chevrolet Truck SUBURBAN
  • Chevrolet Truck TAHOE 4WD, TRAVERSE 4WD
  • Dodge Truck DURANGO 4WD
  • Ford Truck EXPEDITION 4WD, EXPLORER 4WD
  • Ford Truck F-150 4WD and FLEX AWD
  • GMC ACADIA 4WD, SIERRA and YUKON 4WD and XL
  • Infiniti QX56 4WD
  • Jeep GRAND CHEROKEE
  • Land Rover RANGE ROVER 4WD and SPT and LR4
  • Lexus GX460 and LX570
  • Lincoln MKT AWD
  • Mercedes Benz G550 and GL500
  • Nissan ARMADA 4WD and NV 1500 S V6 and NVP 3500 S V6
  • Nissan TITAN 2WD S
  • Porsche CAYENNE
  • Toyota 4RUNNER 4WD, LANDCRUISER, SEQUOIA 4WD LTD and TUNDRA 4WD
  • Volkswagen TOUAREG HYBRID

If you have any questions or need help with your taxes or business deductions call Gregory J. Spadea at 610-521-0604. The Law Offices of Spadea & Associates, LLC is located in Ridley Park and prepares business and individual tax returns year round.

Happy Thanksgiving

Happy Thanksgiving

Understanding How to Apply for a Pennsylvania Ignition Interlock Limited License

Woman blowing into breathalyzer

As of August 25, 2017, Pennsylvania is now requiring anyone convicted of a first time DUI with a high blood alcohol content or for refusing to get an Ignition Interlock Limited license (IILL). An IILL is a driver’s license issued to a Pennsylvania driver whose operating privileges are suspended or revoked for one or more violations of DUI related to alcohol, controlled substances, or for refusing to submit to chemical testing. An IILL allows an individual to drive if certain requirements are met. One of the requirements is that the person’s car is equipped with an ignition interlock device during the term of their suspension or revocation.

The following criminal offenses are eligible for an IILL:

  • Driving under the influence of alcohol or controlled substance (Title 75 Section 3802)
  • Refusal of chemical testing to determine the amount of alcohol or controlled substance (Title 75 Section 1547)
  • It’s also important to keep in mind that a violation of a similar statute in another state like New Jersey, which leads to a license suspension in Pennsylvania due to the Interstate Driver’s Compact is also eligible for an Ignition Interlock Limited License.

An individual can apply for an IILL by completing PENDOT Form DL-9108. This application must be sent with the required fees and documentation to PENDOT via Certified Mail.

An Ignition Interlock System is a device that is installed in a motor vehicle to prohibit an individual under the influence of alcohol from operating a car. A person is required to blow into the device before starting the vehicle. If the device detects alcohol, it will prevent the vehicle from starting. In addition to starting the vehicle, there may be times during the operation of the vehicle when the individual will be prompted to blow into the device to ensure that he or she is not under the influence. An Ignition Interlock System is leased from an authorized vendor within the Commonwealth and currently the average cost associated with the lease is between $900.00-1,300.00 per year. An approved list of vendors is available at the Pennsylvania DUI Association home page www.pa.dui.org.

The penalties for failing to comply with the Ignition Interlock Law are as follows: a first offense will extend the Ignition Interlock period for one year from the date of the conviction and a second offense or subsequent offense will result in a recall of the Ignition Interlock License and a one year license suspension. Even when the license is restored, a person will be required to maintain an Ignition Interlock License for one year after that 2nd or 3rd offense.

Thirty days prior to being eligible to receive an unrestricted driver’s license, PENDOT will mail a notice to the individual that contains the date of eligibility and an application to apply for an unrestricted driver’s license. Prior to PENDOT issuing an unrestricted license, the Ignition Interlock vendor must complete a declaration of compliance which certifies that an individual has not had any incidences with the Ignition Interlock Device.

If you have any questions or need representation for a traffic violation contact Gregory J. Spadea at 610-521-0604. Mr. Spadea is the founder of the Law Offices of Spadea & Associates, LLC located in Ridley Park.

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