December 2017’s Tax Cuts and Jobs Act—the grandest tax-code overhaul in three decades—yielded epic changes. The new rules are vast, their reach great. The consequence for advisors is that some age-old planning strategies are history, others are enhanced, and wholly new approaches have been born.

Consider itemized deductions. “Many of our clients are not going to be able to itemize deductions now,” says Kenneth Bagner, a CPA and managing member of the tax practice at Sobel & Co. in Livingston, N.J.

Here’s why: This year’s hurdle for itemizing, a.k.a. the standard deduction, has jumped to $24,000 for joint filers and $12,000 for single taxpayers, almost double last year’s amounts. Compounding the problem is the fact that fewer deductions are permitted. Miscellaneous itemized deductions have been sacked, while deductions for state and local taxes are now capped at $10,000—the so-called “SALT” limitation.

For very successful clients, the SALT limitation takes away tens of thousands of dollars in deductions. “You could start losing money on tax reform once your income is close to seven digits and you’re in a high income tax state,” Bagner says. Although the top federal ordinary tax bracket today is 37%, down from 39.6%, Bagner says that in the past, “39.6% minus the savings from the state and local tax deduction was less than 37%. Now you’re paying more tax for every dollar of income when you’re in the highest tax bracket.”

That’s the last straw for some folks. They’re packing their bags, and states like New York and California face possible emigration of the wealthy. But those states fight back.

“If you move out of New York and you’re a seven-figure earner, there’s a very high probability of being selected for audit, especially if you keep a home there,” says CPA Barry S. Kleiman, tax principal at Untracht Early LLC in Florham Park, N.J. “So we talk to clients about residency audits and legitimately changing their residence. The biggest thing is the planning beforehand, making sure you have the documentation all lined up.”

Clients should retain an accountant in the state they’re leaving, someone well versed in that state’s residency rules, advises Christopher Van Slyke, a partner in the Jackson, Wyo., office of WorthPointe Wealth Management. (Van Slyke says there’s been greater growth at WorthPointe’s offices in Wyoming and Texas—states that do not impose an income tax—than in its California practice, perhaps a reflection of the wealthy’s migration.)

Year-End Planning For Individuals

Now that it’s harder to itemize, clients should put more emphasis on year-end charitable planning. One strategy they could pursue is to bunch charitable contributions—i.e., make a large donation in one year in order to itemize that year. “Many of our clients are accomplishing this by using donor-advised funds,” says CPA/PFS Michael A. Tedone, a partner at Connecticut Wealth Management in Farmington, Conn. “The client receives the charitable contribution deduction in the year of the gift to the donor-advised fund and in future years determines how the gift should be distributed to charity.”

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