Tax Cuts and Jobs Act: What You Need to KnowSubmitted by Reby Advisors on December 22nd, 2017
Helping clients generate predictable streams of lifelong income that fund your lifestyle is a big part of what we do. Because our focus is on helping clients achieve and sustain their lifestyle goals, what matters most to us is that our clients maximize after-tax income. As we always say when it comes to income planning, "it's not what you earn; it's what you keep that counts."
This purpose of this article is to present key facts about the Tax Cuts and Jobs Act and discuss how it may impact your after-tax income. As additional details emerge from the 1,000+ page Act, we plan to keep you up-to-date with new strategies to avoid paying more than required in taxes now and in the future.
In addition, there's an important tip below for anyone who pays real estate taxes or makes quarterly estimated state income tax payments.
Changes to Individual Income Tax Rates
The Tax Cuts and Jobs Act reduces the tax rates for five of seven income tax brackets:
However, keep in mind that for some Americans, changes to deductions and the elimination of the personal exemption may impact which tax bracket you fall into.
Standard deduction, itemized deductions, and personal exemptions
The federal government has nearly doubled the standard deduction, but has eliminated the personal exemption and limited itemize deductions (such as home mortgage interest, Real estate taxes, personal property taxes, state income tax withholdings, charitable contributions).
Here are the changes to the standard deduction:
Noteworthy changes to itemized deductions are as follows:
Important Tip: consider paying real estate taxes and making quarterly estimated state income tax payments before December 31, 2017 in order to get the benefit on your 2017 individual returns
Contact us or your accountant if you have questions on whether paying real estate taxes or estimated state income tax payments before December 31, 2017 is the right strategy for you.
Alternative minimum tax (AMT)
Under the Act, the alternative minimum tax exemptions and exemption phaseout thresholds are increased. The AMT changes sunset and revert to pre-existing law after 2025.
Corporate tax rates
Under the Act, corporate income is taxed at a 21% rate. The corporate alternative minimum tax is repealed.
Estate, gift, and generation-skipping transfer tax
The Act doubles the gift and estate tax basic exclusion amount and the generation-skipping transfer tax exemption to about $11,200,000 in 2018. This provision sunsets and reverts to pre-existing law after 2025.
You may agree or disagree with the Tax Cuts and Jobs Act depending on your political point of view, but what's important from a personal financial planning perspective is continuing to focus on what you can control: knowing how the Act impacts your income taxes and taking advantage of any new benefits. Even if you disagree with it, I recommend making the most of it for yourself and your family.
Contact Reby Advisors
Of course, this blog article is not a substitute for personal tax advice from a CPA or from your financial advisor.
Please do not hesitate to reach out to Reby Advisors for help with your financial plan. Our planning process is designed to uncover opportunities to save on taxes, improve your investment strategy, potentially add investment income, and address critical risks to your financial freedom.
Source: Broadridge Investor Communication Solutions