Tax Outlook
The current tax proposal creates many unanswered questions for planners and clients. There is little time left in the year and no one knows if the bill will pass this year. At this point it is very unclear whether tax payers will face a lower or increased tax burden.
Two positive aspects of the proposal include increased charitable deductions and the elimination of the Alternative Minimum Tax (AMT) which is often triggered by property, sales, and income taxes. However, there are so many planning strategies that will be impacted by this drastic overhaul, that I can only name a few here. It is going to be vital to work with you accountant, CPA, and advisor should this proposal pass.
There are numerous parts to the proposal that will impact the majority of clients who itemize.
Eliminated Deductions to name a few:
Property taxes over $10,000
State Income Tax
State and Local Sales Tax
Medical Expenses
There is no mention of capital gains or qualified dividend tax rates in the initial proposal. This could always change, again leaving us questioning portfolios, etc. Additionally, those who itemize will not be able to continue to deduct investment management fees or tax preparation fees.
Divorces currently in progress and future divorces are going to have a much different discussion when it comes to alimony. Currently, alimony payments are deductible by the payor and taxed as income for the recipient. Under the proposal, the payor is not going to be able to deduct alimony and could easily increase the amount of tax paid.
Flexible Spending Accounts will no longer be able to be used for childcare.
New job? Moving expenses over 50 miles will be taxable.
Graduate students who work for the university they attend will no longer have the free tuition waived from taxes. The tuition will be treated as taxable income. The tuition deduction for faculty’s children is also on the table. The Lifetime Learning Credit is set to be cut and employer paid education tuition will be taxable to the recipient. Additionally, student loan interest deductions may be capped.
As you can see, with just a handful of changes, how much planning may need to be done for individuals and families in the near future. Small business will be affected too. There are numerous more changes, too many to list here, that need to be considered. I continue to monitor the tax proposals and work with your accountants and CPAs to keep you informed and ask that you too reach out with questions.
The post Tax Outlook appeared first on Allegiant Financial Planning, LLC.
