The New Tax Bill will impact your financial plan next year

 

With today's signing of the Tax Cuts & Jobs Act by President Trump, we can look forward to an even more complex tax year in 2018. Here are some areas your financial plan could be impacted by the new rules.

 

Cash flow

 

Your cash flow could tighten with the new tax plan. Although the standard deduction will be twice as much as it is now, the personal exemption is going away.  On top of that, deductions on property and state income tax will be capped at $10,000. Your payroll company may change withholding on your paychecks or you may end up owing more year-end.

 

Real estate

 

If you're planning on purchasing a new home, keep in mind that the mortgage interest deduction will be capped at $750,000.  Those who currently have larger mortgages are grandfathered in. Deductions on interest from home equity lines of credit will be going away.

 

Charitable giving

 

You can still select which stock in your portfolio to give to a charity, however, it's deductibility is only helpful when you're itemizing your return. With the new doubling of the standard deduction you may not be itemizing in future years. Consider doing your charitable giving before the year is out.

 

Retirement

 

If you converted your IRA to a Roth IRA in the past you've had the option to reverse this decision. This is called recharacterization and will be eliminated with the new tax bill.

 

Education savings

 

529 plans are popular for saving for your kids education and spending on college. With the new tax plan, you will also be able to spend this on K through 12 school as well as postgraduate study.

 

Health insurance

 

For Californians, the individual mandate will remain in effect in 2018 even though it's removed as part of the tax legislation.  Beginning in 2019, there will no longer be a penalty for not having health insurance.

 

Death

 

The federal estate tax has doubled from $11 million to $22 million per couple under the new tax plan. This is set to sunset, along with many other provisions, in 2025.  

 

Expats

 

If you live abroad and claim the foreign income exclusion credit then chances are you'll benefit from the reduced marginal tax rates in 2018.

 

Every U.S. taxpayer’s life will change as a result of this new tax bill. Consult your tax and financial advisors regarding how the change will specifically impact you and update your financial plan as appropriate. At Eureka Wealth Management, I work with our clients during times of sudden changes, whether from personal choice or external forces. Find out how you'll be affected by this new legislation by contacting me at info@eurekawealthmanagement.com or 760-537-0791.

 

Happy Holidays!

 

Sources

 

https://www.cnbc.com/2017/12/16/here-are-the-5-trillion-worth-of-winners-and-losers-in-the-tax-bill-heading-for-a-vote.html

https://brighttax.com/blog/trump-tax-reform-bill-analysis-what-does-it-mean-for-us-expats

https://www.cnbc.com/2017/12/15/final-tax-reform-bill-leaves-popular-stock-sale-strategies-alone.html

https://www.curbed.com/2017/12/20/16797590/tax-bill-salt-real-estate-mortgage

 

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Palm Springs, CA. 92262

info@eurekawealthmanagement.com

(760) 537-0791

©2017 BY EUREKA WEALTH MANAGEMENT.

Eureka Wealth Management is a registered investment adviser in the State of California. The adviser may not transact business in states where it is not appropriately registered, excluded or exempted from registration. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any securities or investment advisory services. Investments involve risk and are not guaranteed. Be sure to consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein.