At the end of last year, Congress passed the Tax Cuts and Jobs Act, the largest reform in the past 30 years. Proactive year-end tax planning may help reduce your overall tax burden for 2018 or alert you to taxes due.
A few tips and items you may want to consider:
- Tax brackets have been reduced and the withholding tables have been adjusted. As a result, less tax is being withheld from each paycheck. We recommend that you review your current paystub to confirm if you are having adequate amounts withheld so that you have enough paid in to avoid underpayment penalties.
- The Tax Act also made a number of changes related to deductions. The standard deduction was increased to $24,000 for taxpayers filing jointly and $12,000 for single filers. In addition, some of the itemized deductions have been reduced or eliminated. Real Estate and State and Local taxes now have a $10,000 limit and miscellaneous deductions such as investment expenses and unreimbursed business expenses have been eliminated. As a result, you may no longer itemize your deductions. Personal exemptions for yourself and dependents have also been eliminated. We recommend reviewing your deductions to see how you will be impacted by these changes.
- Now is also a good time to review your taxable investment portfolio to understand the tax consequences of this year’s market activity. Now may be a good time to harvest unrealized losses or realize gains if you are in a low tax bracket as it could be taxed at 0%.
- If you are age 70 ½, subject to Required Minimum Distributions (RMD) from your IRA and are charitably inclined, you may still be able to take advantage of the Qualified Charitable Distribution rules in using some of your RMD for your charitable giving. Especially if you don’t itemize, this provides a tax benefit you would not have received.