Tax Cuts and Jobs Act Individuals 2018
Tax Cuts and Jobs Act Individuals 2018
Tax Cuts and Jobs Act Individuals 2018
Tax Planning & Tips: want to remain above the Standard De-
duction by INCREASING your deductions
Let’s start with the folks that will not be
(e.g. by paying major medical bills in 2018
itemizing due to the new rules. Given
before the deductibility threshold goes
that state/local/property taxes are capped
back up, buying a more expensive home,
at $10,000 and other miscellaneous de-
or giving more to charity).
ductions have been eliminated, that
leaves only charitable contributions, mort-
gage interest, and out-of-pocket medical Other situations & tips:
to play with. Let’s first look at charity Ask your employer to pay for your out-of-
because you have more control over it. pocket business expenses because they
A new game plan for charity: Due to the are no longer deductible. Tell them you
increased Standard Deduction, fewer tax- would prefer to be reimbursed as part of
payers will benefit (tax wise) from their an Accountable Plan. If they refuse then
generous giving to 501(c)(3) groups. Here look for ways to reduce expenses, such as Tips for Business Owners
are some moves you can consider: not upgrading equipment.
The new 20% pass-through income deduc-
If you are greater than age 701/2 you can Consider property taxes when shopping tion is a game changer for those that qual-
donate up to $100,000 directly to chari- for a new home. Some low/middle in- ify. That’s because it gives you ‘something
ty from an IRA. This is a win-win be- come taxpayers may be able to optimize for nothing’. Formerly, the only way to
cause the income is excluded and you the $10,000 cap in state/local/property get a business deduction was to spend
still get to keep the increased Standard tax (if you itemize). money. No you can get a deduction and
Deduction. It won’t pay to have another kid if you keep your money. Let’s take an over-
Skip a year of giving. Then double-up make more than $200,000 (single) or simplified look at the rules & strategies:
the next year. If that doesn’t work, then $400,000 (married). That’s because de- Rule: Service business owners don’t get
skip two years and triple the third. pendent exemptions were eliminated AND the deduction if their taxable income is
you are phased-out (partially or fully) of above $415,000 (married) and $207,500
Consider giving gifts to loved ones in lieu the increased Child Tax Credit.
of charities. Such gifts were never de- (single).
ductible, so you are not missing out on Home equity lines of credit are no longer Strategy: Service business owners above
any tax breaks. Plus, the recipient deductible so you may want to pay-it-off. those thresholds may need careful year-
doesn’t pay any tax, so it’s another win- If you have very high medical bills there end planning. Increasing deductions for
win. This same rule applies for contribu- may be a tax advantage from paying them the current year and channeling income
tions to most crowd-funding (e.g. Go- all in 2018. into next year might get you the deduc-
FundMe) campaigns. The penalty for not having health insur- tion.
For taxpayers that continue to itemize, ance doesn’t go away until 2019 so don’t Rule: Non-service businesses owners can
your situation stays the same. However, if drop your health insurance in 2018 (if the still get the deduction if their taxable in-
you are close to the Standard Deduction only reason you are dropping is to avoid come is above those thresholds. Howev-
you may want to consider DECREASING the penalty). er, the deduction is limited by multiple
deductions (e.g. by paying down your If you are going to be paying alimony then factors including business income, wages
mortgage) and bank the increased Stand- it benefits you to finalize the divorce be- paid, and certain business assets.
ard Deduction. On the flip-side, you may fore the end of 2018. Strategy: Non-service business owners
If you are going to be receiving alimony should meet with their tax preparer to
then it benefits you to finalize the divorce analyze their specific situation.
after the end of 2018. Beyond this, there are many more strate-
If you are shopping for a home in an ex- gies for business owners made possible by
pensive real estate market consider tak- the new tax laws. These details are be-
ing on less than $750,000 in mortgage yond the scope of this letter, so meet with
debt. However, don’t worry if you go your tax preparer to take full advantage.
over by a little because you still get to de-
duct most of the interest. Lastly: It is worth repeating that ALL tax-
payers must wait for the IRS to interpret
the new law before the rules are finalized.