5 Quick Highlights of the New Tax Law

by | Oct 30, 2018 | What's Happening

By Shelley Schexnayder, Communications, Senior Advisor for 1st Global

As 2018 winds to an end, it’s time to both look back on the prior year and look forward into the new year. That also means it’s almost tax time, and this year may look a little different. The Tax Cuts and Jobs Act of 2017 brought sweeping changes to the tax landscape, leaving many to wonder just how it affects them.

While the changes can affect each person or business differently, here are five things everyone needs to know:

  1. Standard deductions? Make it a double. The standard deduction amount has nearly doubled for 2018. Meanwhile, many personal and dependent deductions have been eliminated. Many are expecting the number of people who take the standard deduction, versus individually itemizing deductions, to increase significantly.
  2. To have and to hold from this day forward: lower tax brackets. As you can see in the table below, the tax brackets have changed — in most cases, for the better. Also, the “marriage penalty” of jumping to a higher tax bracket by combining incomes has been eliminated, except for couples earning more than $300,000.
  3. Nest eggs have become harder to crack. For starters, you’ll no longer be able to reverse a Roth conversion. Contribution limits have been raised for certain retirement plans, such as 401(k)s and 403(b)s. Income phase-out ranges for IRA contributors have also changed. Social Security benefits and withholding thresholds have both increased. With all of the tax changes that have come to retirement savings, it’s important to consult your CPA or trusted advisor for advice.
  4. The new tax law may rub SALT into the wound. The state and local tax (SALT) deduction for income and property taxes is now capped at $10,000, which could have a negative impact on taxpayers in states with high state and local taxes.
  5. AMT victims may finally get a reprieve. Historically, families with higher incomes had to calculate their taxes under the standard tax system and under the alternative minimum tax (AMT) system and pay whichever was higher. However, because the AMT didn’t keep up with inflation, it started to affect an increasing number of taxpayers. The new tax law adjusted the amounts for inflation, which means many that were previously affected by AMT will not be anymore.

These five items are just a few of the many changes to America’s tax code. However, the most important thing to know about the new tax law is who to turn to for advice. Your trusted advisor is in a strategic position to assist you with how these changes affect your comprehensive financial plan — from taxes to investments and everything in between.