Tag Archives: SALT

Tax Findings and thoughts from the 2018 Tax Season as we cross the finish line, finally!

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 thoughtsUncle Sam

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

 

A Break (Spring Break – next week) on the way to the Tax Finish Line – Travels

Next week we will all be headed different ways as Spring Break for all occurs. Richard will be in the office as his little ones are out of the house and with my little ones getting closer to driving (less dependence more independence coming) we cherish the last few “Family” spring breaks as they will certainly be different soon…

We will be lightly electronically tethered as a tennis tournament starts our break, followed by a true break to a warmer climate.springbreak

Tax Update – SALT withdrawals

As we get closer to the Tax finish line, we get more views on the tax situation. Generally it is good news, however the SALT or State and Local Tax deduction may cause grief for those in an income tax burdened state or those used to writing off heavy property taxes – be prepared if either or both of those are applicable.

Today is a Friday, heading into a Tennis Weekend, followed by a much desired family spring break ….. Talk to you week after next as we will TRY to stay off the airwaves for a family week – no promises!

Have a Great “FRIIIIDAAAAY” !

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

 

Clumping Property Tax and Deductions Reminder – Standard Deduction Maximization Strategy

Over the Thanksgiving Holiday’s several family members were surprised to find out that there are still tax law changes – well clarifications, that are going on at this time…

It is possible that there will be changes/clarifications occurring right up and through this first “New” Tax season…

Now is reminder time for taxes — but given the above — we have more of a butter knife than a tax scalpel for our surgical tax techniques — No matter …. Let’s go!

Clumping Property Tax

A joint family will receive a $24k – yes … Twenty Four Thousand Dollar STANDARD deduction – add on to this that the new limited – state and local sales tax (SALT) deduction (read property tax) of $10k annually,  planning is needed to maximize deductions.

The easiest and most common way to POSSIBLY maximize deductions is to clump your property taxes as well as other elective expenses. As you can easily tell, clumping your SALT deductions will get you to $20k so we are still not there…

Mortgages interest up to $1million in loan value prior to 2018 and $750k after is still deductible.

Bad Deduction Planning

All of this fancy acceleration and delayed of tax deductible expenses is to avoid the following –

Every year coming up with just under the standard deduction! I.e. $23k of deductions annually is likely not as tax efficient as possible…

A better solution would look like this:

Clumping Taxes

Skip years = Standard/no itemization/simple tax return

According to this AARP report earlier in 2018 the approximate 30% of tax payers who formerly itemized will drop to about 10% –

Bottom Line do not feel bad if you do not itemize, BUT you may still be able to itemize every other year, under an appropriate standard deduction tax max strategy.

Reach out with questions before year’s end – We can help you calculate what the best strategy may be!

Have a Great “Standard Deduction Maximization” 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