December 11, 2018 | Posted in:

Individual Tax Reform Changes to Consider in Your Tax Planning

Most of the time, year-end tax planning is based on tried-and-true principles. For instance, people often end up accelerating deductions into the current year to offset their tax liabilities, while deferring income to the next year. But this year-end is much different than most.


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    Type of Taxes:

    Major tax legislation at the end of 2017 has suspended many prized deductions for 2018 through 2025, while cutting tax rates. As a result, your year-end tax planning will likely need some new moves. Here are a handful of the biggest changes to consider:

    Altered and eliminated tax deductions

    • Personal exemptions. You can no longer count on personal exemptions, including dependency exemptions for children and other relatives. They are eliminated.
    • State and local tax (SALT). The deduction for state and local tax (SALT) payments is limited to $10,000 annually.
    • Mortgage interest. Mortgage interest deductions are modified, including eliminating deductions for home equity loan payments…unless funds from the loan were used to build, buy or substantially improve your home.
    • Miscellaneous expenses. The deduction for miscellaneous expenses, including unreimbursed employee expenses, is eliminated.
    • Moving expenses. Deductions for moving are eliminated (except for military personnel).
    • Casualty and theft loss. Casualty and theft loss deductions are eliminated (except for losses in federally declared disaster areas).

    Enhanced tax deductions

    • Standard deduction. The standard deduction was nearly doubled to $12,000 ($24,000 for joint filers) for 2018.
    • 20-percent business deduction. A new up-to-20 percent deduction is allowed for qualified business income (QBI) of pass-through entities, including sole proprietors.
    • Child Tax Credit (CTC). The Child Tax Credit (CTC) is doubled to $2,000 (with a maximum refundable amount of $1,400) per qualifying child.
    • Medical expenses. The threshold for deducting medical expenses is lowered from 10 percent of adjusted gross income (AGI) to 7.5 percent of AGI for 2018.
    • Alternative minimum tax (AMT). Favorable modifications apply to the AMT calculations, meaning far fewer taxpayers will be affected.


    Upcoming alimony change:

    If you’re planning on divorcing at year-end, consider that alimony payment deductions are eliminated for divorce settlements reached on or after Jan. 1, 2019.

    Why is Tax Planning Important?

    Depending on your total itemized deductions, it may or may not make sense to accelerate certain deductions into this year, or bundle into next year. A review of your year-to-date deductions should be completed before you make any moves.


    Call today if you have questions about your 2018 year-end tax plan.


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