Atlanta Financial Newsroom

The New Tax Bill: Tallying the Results

The New Tax Bill: Tallying the Results
Chris Blackmon, CFP®, CPA
May 13, 2019

“How did the new tax bill affect me?” was the question on everyone’s minds this tax season, and for good reason. Even though this was touted as the greatest simplification of the tax code in my lifetime, I didn’t notice any reduction in time spent preparing returns. Those of you who reviewed your returns in detail noticed that the schedules look drastically different although contain all the same information. The short answer for many is that it didn’t materially change your overall tax liability. The outliers fell into one of a few buckets:

– Those that paid more in taxes: These were generally married couples or individuals with W2 wages in excess of $250,000. Because the new tax law limited the amount of state income and property tax deduction to $10,000 combined, for those with higher incomes and living in a home or area with significant property taxes in excess of $10,000, the loss of ductions led to a higher overall tax.

– Those that paid less in taxes: These were generally business owners who benefited from the 20% passthrough deduction; couples with children whose income previously adjusted them out of the child tax credit but are now were able to benefit from the $2,000 child tax credit; or those that had comparable income and deductions to prior year, but benefited from the lower marginal rates.

My takeaways and planning tips coming out of tax season are:

– Whether self-employed or working and receiving a W2, reach out to your CPA or tax professional during the year and have them review the amount of tax being withheld or your estimated tax percentage to ensure you know where you stand and won’t be surprised next year at tax time. It has become apparent through news stories that companies made mistakes when adjusting withholding and many employees had less withholding than needed.

– Many retirees will take the standard deduction of $26,600 as most of our clients do not have mortgage interest to deduct and do not pay enough in property tax or state income tax (due to the Georgia retirement income exclusion or Alabama pension income exclusion) to deduct the full $10,000.

Therefore, charitable giving should be done directly from your IRA. This will reduce your overall AGI and could help with taxability of Social Security and/or Capital Gains and will allow for you to still receive the tax benefit from giving to charity. If you are charitably inclined, contact your advisor to discuss whether a Qualified Charitable Distribution makes sense for you, and how we can assist with the details of making these kinds of contributions.

Share This:

Share on facebook
Facebook
Share on linkedin
LinkedIn
Share on twitter
Twitter
Share on google
Google+

“COVID-ed” Lessons: Four Things the Pandemic has Taught Us About Savings in the Face of Financial Uncertainty

In my life and career, I have found three things overwhelmingly true with money:
1) The unexpected is inevitable- you better be prepared financially.
2) To accomplish something meaningful with money, a commitment to saving is implicit.
3) Wealthy individuals all seem to resiliently pursue a discipline of saving money despite their circumstances.
The common denominator across these three principles is simply a commitment to saving money. It is the foundation upon which all other financial success will be built. And 2020 has challenged that resolve thus far.

Read More »

4 Things That Will Be More or Less Expensive After Coronavirus

COVID-19 has impacted nearly every aspect of the economy. When President Donald Trump declared the virus a national emergency at the beginning of March, standards of living rapidly shifted: governors enacted stay-at-home orders, learning institutions closed and consumers suddenly faced unprecedented challenges.1 While the travel and tourism industry is seeing record lows, demand for staple foods and hygiene products has surged.

Read More »

4 Lessons Learned from the Last (Great) Recession

When financial markets fall and the economy stumbles, the phrase “this time it’s different” is commonly heard. This is a natural reaction as the strongest emotions tend to arise at the onset of a downturn when uncertainty is greatest. But if history has taught us anything, it’s that the most practical strategies to implement in any downturn are fundamentally the same each time regardless of market and economic events.

The COVID-19 pandemic might be unlike anything we have seen before, but the uncertainty is nothing new to a financial market that has remained strong and impervious over time. At times like this, looking at history and incorporating its lessons is always a prudent strategy.

Read More »

Yearly Archive

Author Archive