Given our close interaction with Bach, James, Mansour & Company clients during the annual tax return filing “season,” we always receive a lot of questions about current and future returns. This year the Q&A activity was much higher than normal. Not surprisingly, many questions relate to the new Trump tax cuts that will impact 2018 tax returns filed in 2019. There were a lot of great questions, so I polled the BJM team to assemble a list of the best questions to share. Here are our top picks:
How will the Trump tax cuts impact our 2018 taxes?
We’re still waiting for IRS guidance to be published later this summer, but here’s what we’re seeing so far. With few exceptions, everyone’s individual tax rate should be cut by at least 2%. Even with fewer itemized deductions and no personal exemptions, the 2018 tax projections we’ve run show some tax reduction. That is actually better than I originally expected.
What about the Georgia state tax impact?
Georgia may be a different story. Especially for those who no longer itemize deductions, you may end up paying more Georgia state taxes. Even the newly-doubled standard deduction won’t be enough to offset the lost tax savings.
Have some federal deductions been eliminated?
Yes, and others have been restricted. The deduction for state and local taxes is capped at $10,000. Deductions that have been or will be eliminated include
- Unreimbursed employee expenses
- Moving expenses
- Alimony for divorces finalized after 2018
- Investment expenses like brokerage commissions and management fees
You may still be able to deduct home equity loan interest, as long as it is used to improve your home and meets a number of limitations.
What happened to the Alternative Minimum Tax (AMT)?
Fortunately, fewer people will be impacted by this antiquated tax. I’ve read that only a fraction of the millions impacted in 2017 will have to worry about it going forward.
Are there still ways to minimize tax liability?
There are a number of options always available, such as charitable contributions and retirement plan contributions. Other options, like the Georgia land conservation programs, film tax credits, and rural hospital tax credits, require some expert guidance before you jump in. I can help you evaluate these opportunities, but you’ll need to act quickly while the credits are still available.
What’s the new tax deduction for pass-through businesses?
Some business owners who are taxed at individual (vs. corporate) rates may qualify for a 20% deduction on qualified business expenses. The rules are pretty complicated, and special rules apply for “professionals” like doctors, lawyers, and CPAs – but not architects and engineers. Really? Hopefully the IRS will clarify and provide additional guidance.
Should I change by business to a C Corp?
Many business owners are interested in taking advantage of the new 21% flat tax rate, but every company and owner situation is different. Since tax savings aren’t the only business decision driver, please contact me to review your options.
Are the Trump tax cuts permanent?
While corporate tax cuts are permanent, the majority of the provisions in the Tax Cuts and Jobs Act of 2017 will expire at the end of 2025. At that time, they revert back to the pre-2018 structure, unless congress makes additional changes between now and then.
How much should I be saving for retirement?
If you have to ask, you’re probably not saving enough. The best way to estimate this is to build from the bottom up, calculating how much you’ll need to live on and for how many years. Then we can determine how much needs to be saved so there’s enough available to maintain that lifestyle.
Let’s run some 2018 projections
In addition to our good looks and humorous disposition, another advantage of working with an experienced CPA is that we utilize some really high-end tax preparation technology. We can review your 2017 results, adjust income and expenses as needed for 2018 reality, and project your 2018 tax liability under the Trump tax cuts. With that information, we can start looking for opportunities to reduce your 2018 taxes. The sooner you contact me, the more time you’ll have to make adjustments!
Neal Bach, CPA