Frequently our posts here act as a diary, for clarification, look back, and for possible reference in the future.
With tax season officially ending today – thank goodness – we felt like no better time than the present to pin our thoughts on what we saw this tax season.
So here we go…
2018 New Tax Law Review and thoughts
Initially as we entered the tax year, we heard rumors and complaints of higher taxes – which on our first few returns, we found inaccurate.
As we carried through tax season we found that there were winners and losers and we will try to explain in greater detail for future reference for this time next year and for possible planning… for the record it way generally very hard to anticipate the winners from losers in advance as each situation seemed to have it’s own twist.
This is in general and very broad terms – as there are always exceptions, especially when dealing with taxes..
First the losers:
Single Taxpayers – With many deductions no longer allowed, simple standard deduction caused lower write offs in many cases.
Folks with heavy real estate right offs – SALT -State and Local Tax – deduction limited many – For the record clumping did not work as well as we had hoped.
Folks and heavy tax state residences – Again due to SALT deduction, we saw limits being reached frequently.
Folks that just fell under the itemized deductions due to limitations from the new tax laws – Limited deductions held many under the standard deduction.
Charitable donors – but not heavily charitable donors – standard deduction comes in play.
And the winners:
Large Families – Child credit in play here – $2k credit per child helped.
Married couples – especially those that had been filing non-itemized returns in the past-higher deduction in play here – a net gain in the higher standard deduction.
Non Itemizers – Those filing regular standard tax returns, usually found meaningful benefit.
Business owners with qualified pass through taxes – lower tax rate at work here.
Real estate holdings that were not high property tax but possibly had meaningful interest expense – Although SALT limited much, interest expense was not limited in many cases.
So what have we learned?
Given the lower marginal tax rates in certain situation it likely makes sense to accelerate IRA distributions if one is in the appropriate asset position.
Heavy property tax real estate holdings may have limits, the SALT limit will greatly affect the deductions of such holdings.
While salt clumping – The clumping the property taxes-may not work as well, charitable deduction clumping will work very effectively but needs planning. Clumping years of charity gifting to get over the standard deductions may provide greater benefit.
In closing, the thing we learned the most –
The new tax forms and all of their crazy schedules are horrible!
The effort to go to a simplified tax return was nice, however it over complicated the details of any non-simple tax return.
We hope that in the future many of the schedules are enlarged or pulled to the front as it is very difficult to reconcile and reconcile tax returns with the current forms.
Have a Great “Last Unofficial” Tax Day!
John A. Kvale CFA, CFP
Founder of J.K. Financial, Inc.
A Dallas Texas based fee only
Financial Planning Total Wealth
Management firm.
jkfinancialinc
street-cents
November 2015 Year End Tax and Financial Planning Tips, Capital Market Monthly Review (Video by John Kvale)
Welcome to our monthly Economic, Capital Market, and Financial Planning tip of the month.
For those new to our writings, we touch on the most pertinent Financial “stuff” along with a video of my mug that has even more specialized details of the latest month as well as this post.
Ok…let’s go!
VIDEO
YouTube Direct Link
Push that income out
These are just a few simple examples of possible deferred income you may wish to push out.
In our income pushing post, here we discussed in great detail a simple technique that is often forgotten but may at least defer your income taxes. If you can hold off on realizing this income of the next 30 to 40 days you will at least possibly get 15 to 16 months to pay these taxes — we will be glad to help if you have any questions!
Donation maximization and optimization
In our donation optimization post will we discussed the various options for maximizing your donations, always staying well within the boundaries of the tax laws, but focusing on maximization is our goal!
Rates to be raised
October’s unemployment report gave Janet Yellen, head of the Federal Open Market Committee-FOMC, a green light to raise rates. While we do have another economic report, November’s at week end – it appears the economy is moving in the direction the Fed wants it to, and the FOMC will be able to raise rates.
What’s neat about this possible movement, which is different from September, is the markets-and market participants, seem to be prepared and are happily welcoming an interest rate increase!
I am completing this video and post over the Thanksgiving weekend holidays. It’s interesting to think that we are worried about raising rates .25%, when during this weekend, several conversations were about receiving a one year CD at 17% annualized rate – wow what a long way we have come. We welcome the rate increase, look forward to it, and think that it may actually have a more positive effect than many think-time will tell!
John A. Kvale CFA, CFP
http://www.jkfinancialinc.com
http://www.street-cents.com
8222 Douglas Ave # 590
Dallas, TX 75225
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Posted in Economy, General Financial Planning, Investing/Financial Planning, Market Comments, Tax Related, Video
Tagged Accelerate, Charitable Donation, Donation Optimization, Donations, Push out of income