High-net-worth taxpayers are running out of time to make strategic moves in 2019.

“Wealthy clients should avoid treating year-end planning as an afterthought,” says Suzanne Shier, wealth planning and tax strategist with Northern Trust Wealth Management in Chicago. “The Tax Cuts and Jobs Act motivated people to take action in 2018, and the election may well motivate people in 2020. Clients may lack a sense of urgency in their tax planning in the 2019 hiatus. A wait-and-see approach to planning is seldom optimal.”

Tax reform has eliminated some last-minute tax strategies and made others more critical. Clients will still want to pursue time-tested strategies—by maximizing their retirement contributions, for instance, making charitable contributions, exercising stock options and timing business expenses.

“If you have a business and if you were planning on buying a car to drive for business or [buying] that printer or computer next year, buy it before the end of the year,” says Brian T. Stoner, a CPA in Burbank, Calif.

At the same time, he adds it isn’t necessarily tax-effective “to put the money in investments now instead of buying something [deductible] you’ll buy anyway next year. You defer your tax savings a full year.”

For some people, old habits die hard. “I did find that high-net-worth clients who itemized prior to the 2017 tax act continued to itemize in 2018, although they were hurt by [the limited] state and local tax deduction, and by elimination of unreimbursed employee business expenses and miscellaneous itemized deductions,” says David Markle, CPA at Markle Wealth Management in Danielsville, Pa., and member of the Pennsylvania Institute of CPAs.

“Before the [Tax Cuts and Jobs Act], we always had to figure out how much our clients should prepay their state taxes or property taxes by December 31,” says Lawrence Pon, a CPA and certified financial planner at Pon & Associates in Redwood City, Calif. “The $10,000 [state and local tax] limitation makes this a moot point. Some clients just ask how much they need to give to get their taxes to break even.”

Year-end planning for the remaining itemized deductions, such as charitable contributions, needs particular review this year now that other deductions have disappeared, according to Scott Kadrlik, a CPA and managing partner at Meuwissen, Flygare, Kadrlik & Associates in Eden Prairie, Minn. “High-net-worth individuals will probably reach the SALT limit and may have mortgage interest limited to the new mortgage limits of $750,000, or may have much smaller or no mortgage interest to deduct,” he says.

Charitable Contributions

First « 1 2 3 » Next