What to Bring
We will need a complete picture of your financial situation so that we can design a proposal best suited to your needs and goals.
Prepared Ahead of Time
What to Bring
These may include, but are not limited to:
Copy of most recent IRA, 401(k), pension, profit sharing, and/or employee benefit statements. (Please include your current contributions and your employer’s contributions.)
List of all bank and/or credit union accounts that are relevant to your retirement plan. (Please include both checking and savings accounts, with current balances.)
Copy of most recent Social Security benefits statement. (www.ssa.gov)
Copy of most recent brokerage statements.
List of all CDs, including maturity dates and interest rates.
Copy of most recent Federal income tax return.
Life and/or long-term care insurance policy statements.
Beneficiary information: name, address, Social Security #, date of birth.
How is My Tax Situation Different After the Passage of the Tax Cuts and Jobs Act?
Answered by Jamie Hopkins, Esq., LLM, CFP®, ChFC®, CLU®, RICP®, Director of Retirement Research, Carson
Answered by Jamie Hopkins, Esq., LLM, CFP®, ChFC®, CLU®, RICP®, Director of Retirement Research
The Tax Cuts and Jobs Act was the single largest tax reform legislation passed in the last 30 years. It changes tax laws that impact retirement planning, mortgages, corporation, partnerships, small-business owners and even state taxes to some degree.
While the TCJA was passed and signed into law on Dec. 22, 2017, 2018 was the first year it really hit home for personal income taxes. As you gear up to file your taxes before April 15, 2019, you might be surprised to find many popular tax deductions are either significantly smaller or eliminated altogether.Let’s look at three popular tax deductions that are changing for your 2018 tax filing.
1. Mortgage Interest Deduction
While the tax code does not generally allow individuals to deduct personal interest expenses, there is an exception for your home mortgage interest. Prior to 2018, you could deduct interest paid on up to the first $1 million of a mortgage used to acquire or substantially improve your home. Additionally, you could deduct interest paid on the first $100,000 of a mortgage that was used for any other purpose — known as “home equity indebtedness” — like to pay off credit card debt, cash out equity or for college expenses.
Starting in 2018, you can no longer deduct home equity indebtedness interest. There is no grandfathering and really no way to change this debt. Even if you refinance home equity indebtedness into another mortgage, the non-deductibility follows it. The deductibility of the interest really does go to how you used the loan.
If your mortgage was used for anything other than substantially improving the property or purchasing the home, it is no longer deductible. Furthermore, new mortgages issued after Dec. 15, 2017*, that are treated as home acquisition indebtedness now have a cap on the interest deduction for interest paid on the first $750,000 of debt.
However, prior acquisition indebtedness mortgages are grandfathered in under the $1 million limit. Additionally, any mortgage interest deduction requires that the taxpayer itemize their deductions.
2. State and Local Tax Deduction (SALT)
Many states charge state income taxes. In the past, you could deduct almost any state or local income taxes paid from your federal taxes to help reduce your tax burden. However, the TCJA made significant changes to the deductibility of your state and local taxes.
Now, in 2018, filers are capped at $10,000 per year total for state and local income taxes, property taxes and sales taxes. Single filers have a maximum deduction of $10,000 for SALTs — and so do those married filing jointly!
The SALT deduction limit of $10,000 hits those in high-income tax states the most — states like New York, New Jersey, California, Massachusetts and Connecticut.
Even if you live in a low-income tax state, you could lose a significant deduction if you have a lot of property. If you have big estates, lots of land or acres, you could see this tax deduction severely curtailed by the new cap. Just like with the mortgage interest deduction, you need to itemize to benefit from the deduction.
3. Charitable Contributions
While charitable contributions were not removed by the TCJA, far fewer Americans will be able to take advantage of them in 2018. In order to deduct charitable contributions, you need to itemize. The number of tax filers who will itemize for 2018 is expected to drop dramatically.
But this isn’t all bad news. One reason itemizing at the federal level is dropping in 2018 is due to both reduced deductions and standard deduction almost doubling. In 2018, the standard deduction for a single filer is $12,000 and for married filing jointly is $24,000 — nearly double the standard deduction in 2017.
As such, far fewer individuals will have itemized expenses taking them above the standard deduction, meaning many people will not be able to deduct their charitable contributions. Keep in mind that there are some strategies to maximize your tax deductions for your charitable contributions, including bunching contributions and donor advised funds.
Whether you end up paying more or less in taxes in 2018 really depends on your situation. If you relied heavily on these popular itemized tax deductions in the past, your taxes could go up. Overall, most people will end up seeing a slight decrease in taxes thanks to the increased standard deduction — even though we said goodbye to some big deductions.
* Note that there’s an exception/grandfather clause for mortgages where there’s a binding contract before Dec. 15, 2017, to close before Jan. 1, 2018, and the purchase is complete by April 1, 2018
This is designed to provide accurate and authoritative information on the subjects covered. It is not, however, intended to provide specific legal, tax, or other professional advice. For specific professional assistance, the services of an appropriate professional should be sought. Cetera Advisor Networks LLC does not provide legal or tax advice.
From Tax Efficiency to Retirement: Financial Planning for Small Business Owners
Financial planning for a small business gets more complicated every day. Business owners must navigate tax efficiency (and life under the new Tax Cuts and Jobs Act), retirement preparations for yourself and your employees, and succession planning. Get your financial plan in place today and prepare for what tomorrow brings with our guide to financial planning for small business owners.