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Change is in the Air


Tax change, that is. My last post went through the basics of your tax return. I want to stick with the tax topic for one more week to give you a quick guide to understanding how the new tax laws will impact your 2018 tax return. Remember, knowledge is power! (Note: this is a very high-level overview. As with all things tax, there are “if, and’s, and but’s” to everything. This is simply to help you identify questions you should be discussing with your tax advisor.)
Rates – for married filing joint taxpayers, the rates are lower for 2018 than for 2017 at all but the lowest (10%) bracket. The amount of the rate decrease varies by income level so take a look at the rate tables to see what has happened to your rate.
Income – yep it’s still taxable – no change to the “normal” items like wages, dividends, capital gains, etc. The only “common” change is in relation to alimony received so make sure you talk to your tax advisor if you are divorcing. This provision relates to divorce agreements after 2018.
Adjustments – there were not a lot of changes in this area but a couple worth noting:
• Alimony paid will no longer be an adjustment for agreements after 2018.
• Domestic production activities deduction is no longer available. See line 35 of your 1040 to

Area 2017 & Prior 2018 to 2025
Medical Expenses > 10% of AGI is deductible > 7.5% of AGI is deductible (for 2018-2019)
SALT – State & Local Taxes Unlimited Limited to $10k total (that’s state taxes + property taxes)
Mortgage Interest Acquisition debt limited to $1.1 million in order for interest to be deductible Acquisition debt limited to $750k – HELOC interest not deductible
Gifts to Charity Limited to 50% of AGI Increased to 60% of AGI
Casualty & Theft Losses > 10% of income deductible No deduction
Job & Misc Deductions > 2% of AGI is deductible No deduction (this is your tax prep fee & investment management fee and well as unreimbursed job expenses)
Limitation on itemized deductions Itemized deductions limited for higher income levels Repealed – no limitation

Standard Deduction – doubled. Look at line 40 of your 2017 tax return. If it is less than $24,000 for married filing jointly, you won’t need to itemize for 2018 (assuming no changes in these areas). That makes some of the Itemized deduction changes/limitations mentioned above meaningless. This is the big area to consider as you are looking at your tax situation for 2018.
20% Deduction for “qualified business income” from certain “flow-through” entities and sole proprietorships – this relates to certain K-1 income from S-Corps and partnerships but also potentially from Schedule C businesses. This is an area that is quite complex and has a lot of exclusions so if you have K-1 income, definitely discuss this with your tax advisor to see if you will qualify, and if so, what the impact will be.
Personal Exemptions – gone. Ouch, the $4,050 per dependent reduction in AGI to get to taxable income has been repealed. Look at line 42 of your 2017 tax return to see the impact. At high income levels, these phased out anyway, so it may not impact you.
There are many, many more components to this tax legislation, but I wanted to hit the high points so that you have some idea of the new rules for the tax game. It’s your money so make sure you understand the rules you are forced to play by!

To your financial (and tax) success!
Tana

Information is taken from sources believed to be accurate, but you should not rely on this information except as the basis for discussion with a knowledgeable tax professional.
Disclaimer: The views expressed herein are the personal views of Tana Gildea and are not to be construed as individual advice or as the advice or opinions of Homrich Berg; They should not be considered recommendations as each person’s financial situation is unique to her; they may or may not apply to your situation. If you believe that something communicated may be relevant to your situation, Tana strongly encourages you to consult with your individual tax or financial advisor prior to taking action so that the totality of your unique situation is considered.

Be Where You Are

2018 is two months behind us and many of our new year’s resolutions have already fallen by the wayside. The luster of the new year and the anticipation of the possibilities in front of us may have been washed away with the rain, snow and gloom of the winter months. The gray days drain away our drive.

Ah, this is where we are as March is underway. The sun is starting to shine, but that cold wind pushes us back inside. And how about your relationship with your money? How is it holding up after the flurry of holiday spending and the arrival of the bills? How are you feeling about the way that 2017 wrapped up? Let’s take a moment and think back through the year and note a couple of things that you wish had gone a bit differently financially. Where do you want a do-over?

List two things that weigh on you from last year. Own them – “ya, wish I hadn’t done that.” Now, list what you wish you would have done differently. That is the lesson learned! The feeling of regret is not there to weigh you down; it is there to guide you to something better. Sure, you had to pay a little tuition to get one of life’s lessons, but that’s ok – this is where you are. Now you know better. Now you can set yourself up for success in 2018! Use that regret to fuel your journey to success.

Now, list two or three or four or more things that you are really proud of. “Ya, I totally rocked that!” Let’s take a minute to bask in the awesomeness of financial control and acuity. Wow, that feels so much better. We definitely want to feel more of this.
So what steps can you take to stand firmly where you are, full of the knowledge of past successes and opportunities for do-overs this year, and plan for your 2018 success?

Ready, set, shake off the gray, embrace your goals and make 2018 your year of financial prowess.
To your financial success!

Tana

Disclaimer: The views expressed herein are the personal views of Tana Gildea and are not to be construed as individual advice or the advice or opinions of Homrich Berg. They should not be considered recommendations as each person’s financial situation is unique to her; they may or may not apply to your situation. If you believe that something communicated may be relevant to your situation, Tana strongly encourages you to consult with your individual tax or financial advisor prior to taking action so that the totality of your unique situation is considered.