Atlanta Financial Newsroom

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.

Radical Generosity, a Growing Family Ambition

For young and growing families, it can be hard at times to justify a commitment to charitable giving. But philanthropy can take on several forms when it comes down to it. I’ve heard it referred to as the “three T’s of giving”- time, talent and treasure. All three are clearly very valuable aspects of our lives because each are finite in their own respect. As a wealth manager, I obviously see a great deal of focus placed on the monetary side of philanthropy and my professional experience tells me that our individual perspective on personal wealth is often a driver for assessing whether it is (or feels) appropriate to give away our money or things. The more you feel as though you have yet to achieve your own financial security, the more difficult it is to be motivated to give financially. Furthermore, when having a family to provide for, the decision can be increasingly difficult but arguably more important.

February 12, 2020

Is There “Life” after the Stretch IRA for Your Estate Plan?

In the last addition of our newsletter, my colleague Chris Blackmon covered some of the tax implications of the newly-enacted SECURE Act. As you may know, the SECURE Act (which stands for “Setting Every Community Up for Retirement Enhancement Act”) was signed into law in late December and became effective January 1st of this year. As Chris outlined, the Act makes significant changes to how retirement accounts can be funded, drawn down, and passed on to the next generation. While many of these changes have obvious tax ramifications, in this article we want to explore further the less obvious estate planning impact of these changes.

February 12, 2020

New IRS Contribution Limits: Changes for 2020

The IRS just increased the annual contribution limits on IRAs, 401(k)s, and other widely used retirement plan accounts for 2020. Here’s a quick look at the changes.

January 14, 2020

What is the SECURE Act and does it matter to me?

The Setting Every Community Up for Retirement Enhancement (“SECURE”) Act was signed into law on December 20, 2019. With all of the discussion in the news around the political uncertainty, impeachment, and the looming trade war, one of the largest changes to retirement savings laws in recent years was passed with very little fanfare. However, some of the changes will be significant. I have tried to highlight what may impact the majority of our clients and readers.

The Act has a lot of positives such as simplifying rules and making 401k plans potentially available to more workers, pushing back the RMD age, and allowing contributions to IRAs past age 70. The negative impact I see is the elimination of the stretch IRA which is a clear move by the government to raise tax revenues by forcing money out of inherited IRAs sooner. I will discuss in more detail below, but this should be a time to review beneficiaries and discuss whether any change in your legacy planning should be made in response to the new laws. What do you need to pay attention to?