February 1, 2018 • Eric L. Reiner
Whether or not you’re a tax practitioner, it’s critical this tax-preparation season to meet with your clients and prospects. Given the magnitude of the tax-reform legislation President Trump signed into law on December 22, it’s “always a good time to ask questions and broach the subject of life planning, and if you’re not out there having the conversations now, somebody else is,” says Raymond Haller, a CPA and tax partner at accounting and consulting firm Grassi & Co., in Jericho, N.Y., on Long Island. Start the chat by urging clients with high medical bills last year to scrounge for health-care receipts. The new law lowers the threshold for deducting medical expenses for all taxpayers from 10% of adjusted gross income to 7.5%. Inform business owners that bonus depreciation was enhanced retroactively by the legislation. Business property that was both acquired and placed in service last year after September 27 can be completely written off, according to Mildred Carter, a tax analyst at Wolters Kluwer Tax & Accounting, a New York-based tax-software organization. The property can be new or used; in the past, only new property qualified. Talk About 2018 By now, advisors and many clients know that income tax rates are generally coming down in 2018. Moreover, as the accompanying chart reveals, it will take quite a bit more income than before for individuals to pay the maximum ordinary rate, which is now 37% (it was 39.6% before). Carter points out that the top capital-gains bracket no longer coincides with the top ordinary bracket, although the maximum rate on cap gains remains 20% (plus the 3.8% net investment income tax, which the legislation kept intact—sorry). While the aforementioned change to the medical-expense deduction applies to 2017 and 2018, and the repeal of the individual shared responsibility payment for failing to carry minimum essential health insurance is permanent starting in 2019, many of the legislation’s changes to the taxation of individuals are effective from 2018 through 2025. During this eight-year period, itemizing may be out of reach for many clients. The hurdle to itemize is rising—the standard deduction for 2018 is $24,000 for a couple filing jointly and $12,000 for single filers—at the same time that some deductions are being curtailed and others are completely canned. To surmount the standard deduction and benefit from itemizing, generous clients might consider bunching their charitable contributions into a single year. Making larger donations every other year, instead of giving a smaller amount annually, may permit itemizing in alternating years, says Robert Keebler, a CPA and partner at Keebler & Associates in Green Bay, Wis. It helps that deductions for cash contributions to public charities and certain private foundations are allowed for up to 60% of the taxpayer’s adjusted gross income from now through 2025, whereas the figure was only 50% under the law before. Further fueling this charitable strategy is the repeal of the Pease limitation through 2025. Historically it reduced total itemized deductions for big earners. “Its elimination is helpful for clients who make large charitable contributions in a year they have high income,” says Miami CPA John Anzivino, a principal at Kaufman Rossin. First « 1 2 3 » Next
Whether or not you’re a tax practitioner, it’s critical this tax-preparation season to meet with your clients and prospects. Given the magnitude of the tax-reform legislation President Trump signed into law on December 22, it’s “always a good time to ask questions and broach the subject of life planning, and if you’re not out there having the conversations now, somebody else is,” says Raymond Haller, a CPA and tax partner at accounting and consulting firm Grassi & Co., in Jericho, N.Y., on Long Island.
Start the chat by urging clients with high medical bills last year to scrounge for health-care receipts. The new law lowers the threshold for deducting medical expenses for all taxpayers from 10% of adjusted gross income to 7.5%.
Inform business owners that bonus depreciation was enhanced retroactively by the legislation. Business property that was both acquired and placed in service last year after September 27 can be completely written off, according to Mildred Carter, a tax analyst at Wolters Kluwer Tax & Accounting, a New York-based tax-software organization. The property can be new or used; in the past, only new property qualified.
Talk About 2018
By now, advisors and many clients know that income tax rates are generally coming down in 2018. Moreover, as the accompanying chart reveals, it will take quite a bit more income than before for individuals to pay the maximum ordinary rate, which is now 37% (it was 39.6% before). Carter points out that the top capital-gains bracket no longer coincides with the top ordinary bracket, although the maximum rate on cap gains remains 20% (plus the 3.8% net investment income tax, which the legislation kept intact—sorry).
While the aforementioned change to the medical-expense deduction applies to 2017 and 2018, and the repeal of the individual shared responsibility payment for failing to carry minimum essential health insurance is permanent starting in 2019, many of the legislation’s changes to the taxation of individuals are effective from 2018 through 2025.
During this eight-year period, itemizing may be out of reach for many clients. The hurdle to itemize is rising—the standard deduction for 2018 is $24,000 for a couple filing jointly and $12,000 for single filers—at the same time that some deductions are being curtailed and others are completely canned.
To surmount the standard deduction and benefit from itemizing, generous clients might consider bunching their charitable contributions into a single year. Making larger donations every other year, instead of giving a smaller amount annually, may permit itemizing in alternating years, says Robert Keebler, a CPA and partner at Keebler & Associates in Green Bay, Wis. It helps that deductions for cash contributions to public charities and certain private foundations are allowed for up to 60% of the taxpayer’s adjusted gross income from now through 2025, whereas the figure was only 50% under the law before.
Further fueling this charitable strategy is the repeal of the Pease limitation through 2025. Historically it reduced total itemized deductions for big earners. “Its elimination is helpful for clients who make large charitable contributions in a year they have high income,” says Miami CPA John Anzivino, a principal at Kaufman Rossin.
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