Comprehensive Financial Planning, Inc. produces a quarterly newsletter to provide established and prospective clients with current financial news and information. Content is succinct and relevant, and worth your time to review. Stay current by signing up for the FREE newsletter—your email won’t be bombarded, just a helpful update every three months.
The most sweeping changes to the Federal tax code was signed into law in late December. Most (but not all) individuals will get a tax cut next year, however the individual tax cuts are set to expire in 2025. The old and new tax brackets are compared at the bottom of this letter. The AMT exemption has gone up so that few will pay this additional tax.
Corporations will get a big tax cut with the top rate going from the current 35% down to 21% with no provisions for expiration. The corporate AMT has been eliminated.
Estimates indicate the changes will increase the Federal deficit by at least $1 Trillion dollars over the next 10 years. The New York Times has a great summary of the provisions and you can see them at the link below.
If you act quickly you may be able to take advantage of the changes by considering the following before the end of the year. Every individual situation is unique so I would encourage you to consult your CPA and myself.
With rates going down next year for most it could pay to delay income until after the first of the year and accelerate deductions this year.
About 50% of households itemize their deductions vs. taking the standard. Because the standard deduction is almost doubling and some of the itemized deductions being eliminated or reduced you should considering doubling down on your itemized deductions this year. This would be especially applicable to those who already itemize or who have just been short of itemizing in the past. For example, you could go ahead and make charitable contributions now vs. waiting until next year. You could also look at a Donor Advised Fund to make a large donation now and gift is over many years, using it as a life-time gifting account. You could also pay your 2018 property now. Just contact your local county and they will tell you how to do it and how much you can pay.
While corporations will get a big tax cut, many small businesses who are pay taxes as sole proprietors, LLCs, or partnerships who’s business income flows thru to your personal tax return will get a 20% tax credit on that pass-thru income. This tax credit will not apply to companies who only provide a service, like lawyers, accountants, and yours truly. This will open up a whole new world of tax loopholes as not only does your form of business determine your taxation, now the nature of your business will also be a factor. So much for simplifying the tax code.
For your business consider buying equipment or machinery and taking the Section 179 deduction this year, just realize you have to put it into service this year.
Another big change that is in the bill that did not make any of the headlines is the change to the method of inflating many credits, deductions, etc. The bill would use "chained CPI" to measure inflation, which is a slower measure than is used today. The net effect is your deductions, credits and exemptions will be worth less -- since the inflation adjusted dollars defining eligibility and maximum value would grow more slowly. It also would subject more of your income to higher rates in future years than would be the case under the current code. This change has been discussed for many year as one way to reduce the inflation increases to Social Security and other benefits. Watch for this in the near future to help make up for the reduced revenues from the tax cuts.
Call me if you would like to discuss your situation.
Don’t trust your search for information to a Google™ robot! The following references and informative links have been previewed and selected personally by Comprehensive Financial Planning, Inc.
NAPFA Personal Finance Blog Information from other fee-only advisors
Kiplinger.com Great personal finance magazine
ConsumerFed.org Consumer Federation of America
Consumer.gov Lots of info on ID theft, do not call registry, etc.
Experian.com Obtain your credit report
ConsumerReports.org Consumer Reports magazine
HSAColorado Health Savings Account providers in Colorado
BankRate.com Rates for CDs, loans, etc.
ICFE.info Lots of info for parents and children, credit repair
SavingForCollege.com 529 college savings plans
EFC Plus Our partner for college planning services
CollegeBoard.com SAT sponsors information
FinAid.com Financial aid for college with calculator to determine aid qualifications
FastWeb.Monster.com Free scholarship database
StudentAid.Ed.gov Apply here for federal aid (don't have to be poor)
Morningstar.com Info on funds and stocks
Finance.Yahoo.com Lots of data on historical prices
NAREIT.com National Association of Real Estate Trusts
PublicDebt.Treas.gov Buy U. S. savings bonds
CFP.net Certified Financial Planner Board
NAFPA.org National Association of Personal Financial Planners
Dora.State.CO.us Colorado State Division of Securities- Check my registration
SEC.gov Securities and Exchange Commission
IRS.gov Internal Revenue Service
SSA.gov Social Security Administration
TaxColorado.com Colorado tax authority
Livingto100.com Best life expectancy calculator-try it out
AARP.org American Association of Retired Persons – Anyone over 50 can join
Medicare.gov Find out about benefits and your eligibility
Money Saving tips for Seniors All kids of information on saving money.
BenefitsCheckup.org Information on government programs to help seniors
COBar.org Colorado Bar Association: Info on estate planning, probate costs in Colorado
AgingLifecare.org Find a caregiver at the National Association of Geriatric Care Managers
CaseyLynchCPA.com Casey Lynch, CPA for individuals, business owners and non-profits
ryan-insurance.net John Ryan offers Life, disability and Long-term Care Insurance.