Tax Strategies for Individuals - Part 2

Withholding for 2018

The Tax Cuts and Jobs Act enacted in 2017 has many changes that could affect individuals’ Federal tax liability in 2018. For example, many people who used to itemize their deductions will be using the increased standard deduction in 2018. It is a good idea to review the amount that your employer is withholding from your wages and make any adjustments necessary to avoid surprises in the spring of 2019. You may be able to use the withholding calculator on the IRS website to calculate any changes that you need to make. Of course, your HM&M tax advisor will be glad to assist you in calculating any adjustments that you should make to your withholding.

Miscellaneous Itemized Deductions

As of the date of this writing, the TCJA has done away with the miscellaneous itemized deductions, also known as the 2 percenters. These deductions were limited to amounts in excess of 2 percent of your adjusted gross income. This category of expense included unreimbursed employee business expenses, investment management fees, certain legal and accounting fees, as well as a few other items. There are some strategies that could be utilized to change your tax picture for 2018 and beyond by helping to offset the loss of these deductions.

Are you paying large fees for investment management? Have you talked with your investment advisor about strategies to shift the way in which the fees are charged? Consider contacting your HM&M advisor for possible strategies to minimize the amount of investment fees that will fall into the now nondeductible 2 percent category.

Is your job structured in such a way that as an employee you are paying significant expenses out of pocket? Contact your HM&M advisor to discuss how the new tax law affects your situation.

529 Plans

Sec. 529 Qualified Tuition Plans have been a widely used tool to help taxpayers save money for college, presuming they distribute that money for qualified higher-education costs. Depending on your Sec. 529 plan, you may be eligible for a state tax deduction for contributions to the plan. 529 Plans allow for tax free earnings on investments as long as the funds are withdrawn for qualified expenses. Under Sec. 529 an Education Savings Plan previously could only be used for qualified higher education expenses (for most colleges or universities) including tuition, mandatory fees, and room & board. The TCJA expanded the opportunities available for education tax planning by permitting $10,000 per year to be distributed from Sec. 529 plans to pay for private elementary and secondary tuition. Contact your HM&M advisor to learn how these new rules may help you pay for private school tuition for your family.

Let’s discuss your projected withholding or allowable itemized deductions for 2018!