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“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.
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There comes a point in nearly everyone’s life when they begin to wonder if they should continue to rent or make the step of purchasing a home – but throw a global pandemic, low mortgage rates and a crazy housing market into the mix, and it makes the choice a whole lot more complicated. Furthermore, since January 2020, home sales have been steadily increasing.1
In one of his first major moves in office, President Biden has signed the American Rescue Plan Act – a $1.9 trillion stimulus plan meant to extend, renew and implement relief for those affected by COVID-19.
Below is a breakdown of some important components to this legislation, including what business owners, families and struggling individuals may need to know.
One year into the pandemic, Americans are continuing to strike a balance between staying safe and handling their day-to-day responsibilities. One major challenge we all face this time of year (pandemic or no pandemic) is filing our taxes on time. On March 17, less than one month until Tax Day, the IRS announced an extension for the 2021 tax filing season. Here’s what you need to know about filing your 2020 taxes.
One year into the pandemic, individuals everywhere are experiencing emotional, physical and economical implications. In an effort to ease the pandemic’s detrimental effects, the federal government has recently passed a third stimulus package called the American Rescue Plan Act.
Eligible individuals and families will receive stimulus checks up to $1,400 per person. As a reminder, here’s what you need to know about your third stimulus check.
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