Dog Blog – 3 Winners and Losers of the New Tax Act

Share Post: facebook Created with Sketch. twitter Created with Sketch. linkedin Created with Sketch. mail Created with Sketch. print Created with Sketch.

Dog Blog – 3 Winners and Losers of the New Tax Act

Published by Lucky the dog

Dear Humans,

Every day is made up of a series of wins and losses. For instance, yesterday my two main “wins” were chasing after Audra the cat until her tail got all puffy, and sneaking behind Rob Taylor to eat some of my sister Coco’s dinner! Her kibble always tastes so much better than mine (even though it comes from the same box). However, some losses include the bitter cold weather that I had to endure during my nighttime walk (no coat is fluffy enough to handle that) and Rob pulling me away from Coco’s kibble mid-bite (which was very rude).

 

But regardless of the good and bad moments respectively, each day that I spend in the Taylor household is a good day because I love my family. Unfortunately, not everything results in a net positive for everyone, specifically with the Tax Cuts and Jobs Act of 2017! Depending on your family’s financial situation, the Tax Cuts and Jobs Act could have financially helped your family, hurt your family, or simply been a mixed bag. Below are 3 winners and losers of the Tax Cuts and Jobs Act (TCJA).

  1. Doubling of Estate Tax Exemption

The TCJA doubled the estate tax exemption from $5.49 million to $11.18 million for individuals, and from $11.18 million to $22.36 million for couples. These amounts will continue to be adjusted annually for inflation through 2025. Winners of this change are certainly high net worth individuals, as a married couple can now shelter up to $22.36 million from federal estate tax. Losers of this change include high net worth individuals in states with high state death taxes, such as New York, Massachusetts, and Pennsylvania, where the marginal state death tax rate can be as high as 16% for taxpayers with assets in excess of $11 million.

  1. Changes to Itemized Deductions and Charitable Contributions

Under the new tax laws, the standard deduction was essentially doubled and the “Pease” limitation was removed. The Pease limitation was essentially a stealth tax that previously reduced itemized deductions by 3% of AGI above $261,500 for individuals and $313,800 for married filing jointly.  On the positive side, the new tax laws allow taxpayers to reduce taxable income by excluding up to $100,000 of an RMD from gross income by giving it to charity. The winners of this change include people who believe in tax simplification, but losers include charities who are being hurt by the doubling of the standard deduction..

  1. 529 Distributions are Expanded

The TCJA now allows distributions from 529 plans to be used to pay up to a total of $10,000 of tuition per beneficiary (regardless of the number of contributing plans) each year at an elementary or secondary (k-12) public, private or religious school of the beneficiary’s choosing. Winners of this change include parents who want to send their kids to private elementary and secondary schools in the future. Losers of this change include parents who sent kids to private school 5 years ago and can no longer benefit, and parents who live in states that have not changed the state laws for 529 plans to match the federal consensus.  Be careful about the latter because about twenty states have decoupled from the federal and are taxing the distributions if made for K-12.

Before investing, the investor should consider whether the investor’s or beneficiary’s home state offers any state tax or other benefits available only from that state’s 529 Plan.

In conclusion, depending on your family’s financial situation, the changes that the TCJA made might be financially beneficial or detrimental, and they could even be both! Regardless, make sure that you are getting the best tax and financial advice for your specific situation. If you have any questions about whether your financial future has been affected by the TCJA, feel free to contact the Taylor Financial Group team for assistance.

 

Till next time,

Lucky Taylor

This article is designed to provide accurate and authoritative information on the subjects covered. It is not, however, intended to provide specific legal, tax, or other professional advice. For specific professional assistance, the services of an appropriate professional should be sought.

 

Sources Cited: https://www.wealthmanagement.com/high-net-worth/trump-s-tax-reform-one-year-later-winners-and-losers?NL=WM-07&Issue=WM-07_20181203_WM-07_876&sfvc4enews=42&cl=article_4&utm_rid=CPG09000002814577&utm_campaign=17570&utm_medium=email&elq2=a131d658e5744a4499324f624673bd35

https://www.hrblock.com/tax-center/irs/tax-reform/new-tax-brackets/

https://www.irs.gov/newsroom/irs-offers-guidance-on-recent-529-education-savings-plan-changes

Share:
facebook Created with Sketch. twitter Created with Sketch. linkedin Created with Sketch. mail Created with Sketch. print Created with Sketch.
Share Post: facebook Created with Sketch. twitter Created with Sketch. linkedin Created with Sketch. mail Created with Sketch. print Created with Sketch.

RECENT POSTS

4 Hurdles in Retirement Beyond Your Investment Portfolio

Becoming hyper-focused on only one aspect of a problem is pretty much never a good approach. A racecar driver who only focuses on speed and ignores strategy won’t win races, at least not many of them. A carpenter who only hammers in nails won’t build strong structures. 

Your Silicon Valley Bank Questions Answered

You likely have heard about the recent Silicon Valley Bank (SVB) collapse and probably have questions. Here, we provide you with unbiased answers to your questions.

Thinking About Retiring Early? 8 Things to Consider First

Tom Fridrich, JD, CLU, ChFC®, Senior Wealth Planner We’ve all asked ourselves whether it’s too early to retire (usually after a particularly challenging commute or dealing with a difficult client).  You may have even gone so far as to take a sneak peek at your account statements …

Weekly Update: February 27th

By Debra Taylor, CPA/PFS, JD, CDFA™ Dear Friends, For investors, it may feel like déjà vu all over again as inflation and the Fed dominate market headlines on a day-to-day basis. After all, the numerous market swings last year were driven by ever-changing expectations around the Fed – …

1 2 3 224 225 226

Get in Touch

In just 15 minutes we can get to know your situation, then connect you with an advisor committed to helping you pursue true wealth.

Schedule a Consultation

TweetsFollow Us