Planning Your Personal and Business Affairs under the New Tax Cuts

The Tax Cut & Jobs Act, signed into law on December 22, 2017, made changes to the U.S. tax system that affects nearly everyone. It is now more important than ever to meet with the tax attorneys at Moskowitz, LLP to make sure that your personal financial and business affairs are structured to your maximum advantage under these new tax cuts.

Individuals
Significant changes have been made to individual tax rates and thresholds, deductions and exemptions. The good news is that the top individual tax rate has been reduced from 39.6% to 37%, and the new top rate thresholds have been raised to $500,000 for single taxpayers and $600,000 for married taxpayers. The standard deduction has been increased to $12,000 for individuals and $24,000 for married couples filing jointly, and the child tax credit has increased to $2,000.

However, many popular itemized deductions have been cut back or eliminated, including deductions for state and local income taxes, unreimbursed employee expenses, casualty losses and alimony payments. The personal exemption has also been repealed.

If you rely heavily on itemized deductions to decrease your taxable income, you should review your finances with one of our tax attorneys. We will determine if any other opportunities may have opened up for you under the tax reform, and will plan the most tax-efficient result for you on next year’s tax return.

Estates
The estate tax exemption has doubled to $11.2 million ($22.4 million if married), so it’s time for wealthy individuals and couples to revisit their estate plans. This may warrant removing restrictive tax provisions and otherwise updating your estate planning documents.

Note that absent further Congressional action, the exemption amount will revert to $5 million in 2026 – given this uncertainty, our advice will take into consideration the potential for further changes by a future administration.

Real estate
Homeowners beware – the new tax cuts place a cap on deductions for local sales and property taxes at $10,000 per year. In addition, the cap on mortgage interest deductions for new homes has been reduced from $1 million to $750,000 (but will revert back to $1,000,000 for primary residences if no changes are made to the law before 2026).

U.S. businesses
Good news for business owners! The new tax cuts not only reduce the top corporate tax rate to 21%, but also provides a 20% tax deduction for qualified pass-through entities such as “S” Corporations, partnerships, and sole proprietors. See our page on the new Internal Revenue Code Section 199A to learn more about how to make those provisions work to your advantage.

Tax Attorneys
The tax attorneys and accountants at Moskowitz, LLP are available to ensure that your tax, business, and estate affairs are structured in the most advantageous way possible. To learn more contact our San Francisco office.

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