Look at the Big Picture
• Evaluate strategies for 2018 while considering implications for 2019.
• You should strive to legally minimize income taxes and avoid surprises.
Impact of the Tax Cuts and Jobs Act (TCJA)
• The biggest change in federal tax law in over 30 years! Adjusted tax rates are just one element of the big picture.
• The impact of many other provisions will vary widely among taxpayers.
• The following are just a few of the major individual provisions that could impact taxpayers for 2018.
o The child tax credit doubled to $2,000 per child, will be available to more taxpayers and $1,400 is refundable.
o There is a new $500 credit for “other dependents” who do not qualify for the child tax credit.
o The standard deduction nearly doubled for each filing status.
o Alternative minimum tax (AMT) exemptions were increased.
o The Pease limitation on itemized deductions was suspended.
o The deduction for personal exemptions was suspended.
o Itemized deductions for state and local income taxes will be capped at $10,000 per year.
o Miscellaneous itemized deductions will no longer be permitted.
o Itemized deductions for mortgage interest were curtailed.
Last-minute Amounts
• Does it make sense to postpone income until 2019 or accelerate deductions into 2018?
• Make final deductible payments (mail a check or charge on a credit card by December 31).
• Consider non-cash charitable contributions.
• Maximize 401(k) or similar retirement plan contributions.
• Would it be beneficial to accelerate payments for real estate taxes, state/local income taxes and/or your January mortgage?
• Contribute to a 529 college savings plan?
• Are any funds left in a Section 125 flexible spending account?
• Consider the applicability of making gifts up to the $15,000 annual gift tax exclusion per recipient.
• Analyze non-qualified investments to determine if it makes sense to dispose any of them.
o You may be able to generate deductible losses while preserving much of your original portfolio by selling securities and repurchasing them at least 31 days later.
o Don’t forget about possible capital loss carryovers available from 2017.
Bunching Itemized Deductions?
• This may be beneficial if your itemized deductions are roughly the same as the standard deduction available to you.
• The 2018 standard deductions are $24,000 for a joint return, $12,000 for single and $18,000 for head of household.
• You may be able to adjust timing of itemized deduction payments to maximize your deductions.
Consider Changes in Life Status
• Did your marital status change during 2018?
• Were any children born this year? Did any children get married?
• Did you experience a death in the family?
• Was there a change in your employment status?
• Will you or a dependent begin or end college education soon?
Courtesy: Chris Harper, GVSU & Hungerford Nichols