The new law eliminates the deduction for alimony payments and the corresponding inclusion in income by the recipient. The new rule will apply for any divorce or separation instrument executed after December 31, 2018, or for any divorce or separation instrument executed before December 31, 2018 and modified after that date, if the modification expressly provides that this rule applies to such modification.
The Act repeals a rule which previously allowed taxpayers to recharacterize Roth IRA contributions as traditional IRA contributions. Recharacterization can no longer be used to unwind a Roth conversion.
In addition, the new law extends the “loan offset” rollover period from 60 days to the due date of the tax returns. A retirement plan loan offset amount is generated when the benefits accrued by a plan participant are reduced in order to repay a loan taken from the plan. These offset amounts are treated like distributions, but allowed to be rolled to a new plan in order to defer taxation on the deemed distribution. The new law simply extends the amount of time a taxpayer has to rollover these amounts into a new plan.
Otherwise, the laws relating to retirement plans remain unchanged.
FEDERAL ESTATE TAX
The new law doubles the estate and gift tax exclusion amount for estates of decedents dying and gifts made during the 2018-2025 tax years. Previously, the exclusion amount was $5,000,000 per person, adjusted for inflation. Under this new law, the exclusion amount is projected to be $11,200,000 per person for 2018 ($22,400,000 for husband and wife). As before, beneficiaries will continue to receive a “stepped-up” basis at the date of death for inherited assets.
*Note: The generation-skipping transfer tax exemption amount is also increased by this act.
ALTERNATIVE MINIMUM TAX
The Act significantly raises the income exemption levels for the individual AMT. The exemption amount is increased to $109,400 for joint filers, $70,300 for single filers and $54,700 for married taxpayers filing separately. In addition, it increases the exemption phase-out threshold to $1,000,000 for joint filers and $500,000 for all other taxpayers (other than estates and trusts). These amounts will be indexed for inflation annually.