Questions You Should be Asking Your Tax Professional About the New Tax Law
Donald Trump signed the “Tax Cuts and Jobs Act” into law on December 22, 2017. It is the most comprehensive tax legislation in over 30 years and the turnaround time was incredibly short. Most of the provisions, including income tax rate cuts, went into effect January 1, 2018, only 10 days later.
Hopefully, you have a skilled and well-trained tax advisor to work with. This will not be a regular year, where you may have a question or two. This is the time that your tax professional becomes critical as you discuss the best way to prepare the 2017 filing and, more importantly, plan how the new law impacts 2018 and beyond.
First off, a disclaimer: Most of the Regulations, showing us the details of how to interpret the new law, have not been issued yet. In fact, they will not be issued for months. Therefore, your tax professional may have to qualify or delay answering some of your questions, pending additional guidance from Treasury.
How Does This Affect Me in 2018?
From a personal income tax calculation viewpoint, lots of deductions and credits are changing. Here are the most prevalent “good” items:
- Tax rates are going down;
- Tax brackets are greatly expanded;
- Standard deductions nearly doubled;
- Child tax credit have doubled;
- Phase-out for child tax credit increased;
- Alternative Minimum Tax (AMT) affects fewer filers; and
- Phase-outs on itemized deductions are eliminated.
And here are the downside items:
- Personal exemptions are gone;
- Itemized deductions for taxes paid are limited to $10,000 (although many with large tax deductions were in AMT and received no benefit previously); and
- Loss of miscellaneous itemized deductions.
With the Loss of All Those Deductions, Will I Be Using the Standard Deduction Every Year?
Quite possibly. Filing of itemized deductions is predicted to decrease by 60 percent, from
43 million to 17 million per year. Here in New York, with the large property and state income taxes, the decrease could be even larger. However, you may still be able to maximize your deductions through “bunching.” That is a process where you minimize the allowable deductions in Year 1 and maximize them in Year 2.
- Will I need to adjust my withholding?
- Will this help me to save/plan for college tuition for my kids?
- What about my retirement savings plan, I heard they were impacted?
- If there are tax savings, how should I spend/invest it?
- I heard deductions for employee expenses were going away, is that true?
- How can my small business benefit from the new tax law?
- Have you received technical training or CPE on the new law? How extensive was it?
- What should I be doing now to fully benefit from this new law?