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.
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.
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.
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.
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.
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.
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.
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.
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 firstname.lastname@example.org or 760-537-0791.