Assignment TCJA deduction changes due 9/17, up to 5 points

Please read chapter 14 (or PowerPoints) on the mortgage interest and state and local tax deductions (please see book examples 14-6, 14-7, 14-10

Based on the following:

2017 Schedule A (attached)

2018 Schedule A (Google and find on your own)

2018 Schedule A instructions (Google an find on your own)

1.Compare the 2017 and 2018 Schedule A's.Note a subtle but important difference between the two forms as it relates to the taxes you paid deduction.

2.Refer to the instructions for line 8 (Home Mortgage Interest Deduction).

Assume taxpayer borrowed $1.5 million to purchase a home on January 1, 2017 at 4% interest.Assume the taxpayer pays only interest and does not repay any of the principal.

2a What is the annual interest cost (a mathematical question, not a tax question)

2b. Copy and paste instructions on "Limit on loans taken out on or before December 15, 2017."

2c. Assume the taxpayer is married filing jointly, what is the interest deduction?

3a. Assume the taxpayer borrowed $1.5 million to purchase a home on January 1, 2018 at 4% interest.Assume the taxpayer pays only interest and does not repay any of the principal.

Copy and paste instructions on "Limit on loans taken out after December 15, 2017."

3b. Assume the taxpayer is married filing jointly, what is the interest deduction?

4. Refer back to Schedule A, See the small print under Interest You Paid "Caution: Your mortgage interest deduction may be limited (see instructions)."Explain what the IRS means by that statement.Be specific.

5. As a result of the TCJA (Tax Cuts and Jobs Act of 2017), more taxpayers will take the standard deduction over the itemized deductions.State three reasons for this.Two reasons are based on the work you did in this assignment.The third reason has to do with the size of the standard deduction (see Forms 1040 for 2017 and 2018; be specific).

5a. Reason 1

5b Reason 2

5c Reason 3