As of the writing of this post there is a near 350 page tax reform document that is floating around the various legislative bodies for approval or vote. While we do have some reasonable ideas on the touch points we wanted to remind (or maybe clarify) the process of initiating tax policy. Don’t worry we’d promise we’ll keep this short!
Mandatory Balanced Budget – Best Guess Estimate
In order to pass tax cuts of various magnitude, the presentation must be within some estimate of what is called a balanced budget. This means that if tax policy changes in the form of less taxes, offsetting expense will also need to be changed. Of course these are all estimates of very great magnitude as our US economy is very complicated, some may say even eccentric and in many ways fast moving and other ways very slow moving. So when we have larger tax policy adjustments the time to get across the finish line can be much longer
Tax Law Most Likely Changes – SALT and Estate Tax Extension
So we’re deviating from our normal lane just a little bit to give you a taste of what may be coming down the Pike in that we try not to talk about policies that are not in law because they can change so dramatically. A couple of items that seem to be very likely to be implemented in the tax policy no matter the adjustments, extension of the estate tax lifting and credits, recall that was completed in 2017 when the estate tax limits went up dramatically currently around the $25 million level for joint couples, also the acronym SALT – for state and local tax which is currently marked at the $10,000 level looks to be lifted but by how much seems to be a moving target.
Newsletter and Tax Cheat Sheet Held Hostage
While we have plenty to say about all of this, everything is pretty “fuzzy” at the moment, this has the effect of holding not only our tax cheat sheet hostage, it’s also holding our newsletter hostage, will likely go from not a lot to say … to too much to say much of which will be communicated here, but rest assured our newsletter will be hot on the press as soon as we get some items in law. Not to worry the first quarter of 2020 … given the lockdown we completely trashed our newsletter, and wrote specifically on all of the various policies, so it’s not our first rodeo, but somewhat frustrating.
Tax Laws are Affecting Decisions now – Doing what we can – Delaying is best
Many of you already know this because we’ve had to cross this bridge …. we just have to do the best if there’s a reason for us to make a move at this time. A move would be some sort of distribution, or some sort of taxable event that we just don’t know the result given the aforementioned tax policy change. For all of us that can delay any taxable moves, think annual required minimum distributions or early IRA distributions, we are hopeful that we have clarity sooner, rather than later, as this will most certainly enter into our near year end distribution discussions.
Patience needed
So bottom line, we all need to have our patience hats on, sharpen the saw for when these multiple rules come down, and by the way … we hope for some clarity as there are still some fuzziness in some of the prior laws especially as they relate to Beneficiary IRA’s
Have a Great “Tax Change Update” Day!
John
AI Content Authenticity: AI created the patience picture. All of the following text content has been completed by myself and has not been edited or created by AI. Occasionally we do use AI for images and will note when appropriate.
John A. Kvale CFA, CFP
Founder of J.K. Financial, Inc.
A Dallas Texas based fee only
Financial Planning Total Wealth
Management firm.
