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2018 Year-End Tax Planning for Individuals

As 2018 comes to a close, it is a great time to consider tax planning for 2018, especially in the wake of the Tax Cuts and Jobs Act (TCJA). With more than 130 new tax provisions to consider, it will take careful strategic and proactive planning to optimize your tax position.

TCJA brings a number of changes to deductions and exemptions, most notably to the standard deduction.  Taxpayers will need to evaluate these changes and consider how they affect their individual regulatory filing. These changes include:

  • The standard deduction increase has created philanthropic planning opportunities. This especially holds true when the State and Local Tax (SALT) limitation(s) are considered specifically for those who do not have a qualifying mortgage and associated deductible mortgage interest.
Pre-Tax Reform 2018 (Post Tax Reform)
Single $6,350 $12,000
Married Filing Jointly $12,700 $24,000
Married Filing Single $6,350 $12,000
Head of Household $9,350 $18,000
  • The SALT deduction is capped at $10,000 per year for married filing jointly taxpayers, or $5,000 per year for taxpayers filing separately.
  • Medical expenses are deductible to the extent they exceed 7.5% of adjusted gross income regardless of age.
  • The mortgage interest deduction is limited to interest related to original home acquisition indebtedness up to $750,000 for married filing jointly, or $375,000 for married filing separately, for taxpayers who entered the indebtedness post December 16, 2017.
  • Home equity interest is no longer deductible unless it is used to buy or substantially improve your home that secures the loan.
  • Charitable cash contributions are subject to a 60% adjusted gross income limitation versus the pre-tax reform 50% adjusted gross income limit.
  • Certain miscellaneous itemized deductions that were deductible to the extent they exceed 2% of adjusted gross income has been suspended until 2025.
  • Alternative Minimum Tax (AMT) exemptions have increased, however, fewer taxpayers may be subject to AMT since many of the common AMT adjustments have been reduced or eliminated.
Pre-Tax Reform 2018 (Post Tax Reform)
Single $54,300 $70,300
Married Filing Jointly $84,500 $109,400
Married Filing Single $42,250 $54,700
Head of Household $54,300 $70,300
  • The personal exemption has been eliminated.

Taxpayers who typically claim the standard deduction may see their tax bill decrease in 2018 – although the personal exemption deductions are no longer available, the larger standard deduction, combined with lower tax rates, may result in lower taxes. Taxpayers who typically itemize may find it better to leverage the increased standard deduction this year. It will be important to run the numbers to assess the impact prior to filing your taxes.

Our Family Tax Practice is up-to-date on the latest regulations and ready to assist you in optimizing your 2018 tax return. Connect with us today.

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