Now is the Time to Update your Tax Strategies
By Yvonne Marsh, CFP®, CPA
Updating financial and tax strategies is always a good idea, but with the implementation of the Tax Cuts and Jobs Act in 2018, it is essential this year. The biggest change for all taxpayers is the increased standard deduction to $12,000 for singles and $24,000 for joint filers. The additional $1,250 for ages over 65 remained.
Taxpayers now need to consider grouping their itemizable expenses into one year, so that every other year there are enough expenses to itemize. For example:
Medical Expenses Itemization
To the extent you can, have medical procedures concentrated into one tax year. For 2017 and 2018, the threshold for itemizing medical expenses was reduced to 7.5% of Adjusted Gross Income. In 2019, it returns to 10% of AGI.
Pay 2 years of assessed property taxes in one calendar year. The deduction for all taxes paid – state and local property and income taxes is now limited to $10,000.
Restore your tax deduction for charitable giving:
- Alternate years of charitable giving.
- Establish a donor-advised fund. This is an easy process where you set-up your own charitable fund. Donate to it every other year to group your itemized deduction, but still have the fund disburse its charitable gifts evenly every year. You can set up a fund with as a little as $5,000 and make gifts of as little as $250.
- Qualified Charitable Distributions (QCD’s) become imperative for those over 70 ½ taking Required Distributions (RMD’s). Direct your IRA custodian to disburse some portion of your RMD directly to your charity/church and you can exclude that amount as taxable income.
The new law also changed the “kiddie tax” rates so that investment income earned by minors will be taxed at Trust tax rates – a whopping 37% tax once investment income reaches $12,500. You may think this doesn’t matter to you, but hold on a minute. I can’t tell you how many times I see IRA beneficiary forms set up incorrectly so that a minor could ultimately inherit an IRA. And you guessed it, that is considered investment income that would be subject to these new rates. Now is the time to review all of your pre-tax account beneficiary forms.
If your current advisor isn’t talking with you about these important changes, you need to be talking with us instead. Call, email or visit our website to schedule a complimentary meeting today.
Marsh Wealth Management, LLC
1341 Branton Blvd, STE 105
Knoxville, TN 37922
Financial Planning & Investment Advisory Services are offered through Marsh Wealth Management, LLC (“MWM”), an independent investment advisor registered with the state of Tennessee. Yvonne Marsh is an Investment Advisor Representative of MWM in the state of Tennessee. Marsh Professional Group, LLC, is a TN registered public accounting firm, and a separate legal entity from MWM. For a detailed discussion of MWM and their investment advisory fees, see the firm’s Form ADV on file with the SEC at www.adviserinfo.sec.gov.