What Does the New Tax Law Mean for Me?

Transcription

1 What Does the New Tax Law Mean for Me? Brian Bogart, CFP Principal Portfolio Manager Director Financial Advisor James Bogart, CFP, ChFC Principal Portfolio Manager Director Financial Advisor 1

2 Our Team Brian Bogart Principal James Bogart Principal Peter Knoer VP Financial Advisor Michael Duffy VP Financial Advisor Grant Stucki VP Financial Advisor Michelle Dubay Director of Operations George Musselman Financial Advisor Jonathan Freehill Financial Advisor Aleksandr Spencer Portfolio Manager Hal Frankel Portfolio Analyst Angie Hooks Client Service Advisor Richard McMahon Client Service Advisor Trey Fraim Client Service Advisor 2

3 Our Mission Our mission is to help clients achieve financial peace of mind by preserving and maximizing intergenerational wealth. 3

4 Disclaimer: We are Not Tax Advisors We are Certified Financial Planners, and are familiar with many of the changes of the new tax law. This presentation is designed to provide a helpful insight into a number of the more significant changes relevant to most of our clients Please consult your tax advisor on the specifics of your situation 4

5 Disclaimer: We are Not Tax Advisors Information contained herein is current as of 1/1/18. It is subject to legislative changes and is not intended to be legal or tax advice. Consult a qualified tax advisor regarding specific circumstances. This material is furnished as is without warranty of any kind. Its accuracy and completeness is not guaranteed and all warranties expressed or implied are hereby excluded. 5

6 Disclaimer: We are Not Tax Advisors Bogart Wealth is neither a law firm nor accounting firm, and no portion of its services (or the content fo this presentation) should be construed as legal or accounting advice. Moreover, you should not assume that any discussion or information contained in this presentation serves as the receipt of, or as a substitute for, personalized advice from the tax advisor fo your choosing. A copy of our current written disclosure Brochure discussing our advisory services and fees is available upon request. 6

7 2018 Tax Reform On December 22, 2017, Tax Reform H.R.1 was signed into law. Also known as The Tax Cuts and Jobs Act of The Joint Committee on Taxation (JCT) estimate cost of $1.456 Trillion over 10 years. Approximately $1 Trillion comes from business tax cuts, such as reducing the Corporate Tax Rate from 35% to 21%. 7

8 Changes to Your

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13 Individuals What s Not Changed IRA Contribution Limits Rollover Rules Net Unrealized Appreciation (NUA) Rules Cost Basis Rules Stepped-Up Basis Rules FICA and Medicare Tax 13

14 Traditional IRA Accounts Limit Catch-up (50+) Income Limit Traditional, Non-Deductible $5,500 $1,000 None Traditional, Deductible $5,500 $1,000 If covered by a plan, Single: $63k - $73k Joint: $101k - $121k If one spouse is covered by a plan, Joint: $189k - $199k 14

15 Roth IRA Accounts Limit Catch-up (50+) Income Limit Roth IRA $5,500 $1,000 Single: $120k - $135k Joint: $189k - $199k Roth Conversion No Income Limit 15

16 Retirement Plan Contribution Limits 401k, 403b, Roth 401k $18,500 Catch-up for Individuals 50+ $6,000 Defined-Contribution Plan Limit $55, k Maximum Contribution (50+) $61,000 16

17 Sale of Primary Residence Still can exclude $250,000 ($500,000 joint) of gain Still must reside in property for 2 of last 5 years 17

18 Cost Basis Rules Can still select specific tax lots Must be identified at sale (within 2-day settlement period) Otherwise custodian can not change 18

19 FICA Tax Income Up to $128,400 Employer 6.20% Employee 6.20% 19

20 Medicare Tax Income Up to $200k ($250k for Joint) Employer 1.45% Employee 1.45% Income in Excess of $200k ($250k for Joint) Employer 0.90% Employee 0.90% 20

21 Net Investment Income Tax Obamacare Tax Net Investment Income or Excess of Modified Adjusted Gross Income (MAGI) Single Over $200, % Joint Over $250, % 21

22 Corporate Taxes What s Changed Max rate now 21% vs 35% Pass Through entities get 20% tax deduction Equipment 100% vs 50% depreciation Max Repatriation Tax 15.5% vs 35% 22

23 Individuals Marginal Tax Rates Itemized Deductions Personal Exemption Capital Gains Thresholds Annual Gift Exclusion Child Tax Credit Estate Exclusion Level What s Changed 23

24 Pass Through Entities LLCs, Partnerships, Sub S Corps Except Service Entities like lawyers, doctors, accountants Can deduct 20% of net income 24

25 Rate Schedule Single Taxable Income Marginal Rate Average Rate* $0 $9,525 10% 10.0% $9,526 - $38,700 12% 11.5% $38,701 - $82,500 22% 17.1% $82,501 - $157,500 24% 20.4% $157,501 - $200,000 32% 22.8% $200,001 - $500,000 35% 30.1% $500, % *Assumes taxable income equals top of the taxable income range 25

26 Rate Schedule - Joint Taxable Income Marginal Rate Average Rate* $0 $19,050 10% 10.0% $19,051 - $77,400 12% 11.5% $77,401 - $165,000 22% 17.1% $165,001 - $315,000 24% 20.4% $315,001 - $400,000 32% 22.8% $400,001 - $600,000 35% 26.9% $600, % *Assumes taxable income equals top of the taxable income range 26

27 Estates and Trusts Taxable Income Marginal Rate Average Rate* $0 $2,550 10% 10.0% $2,551 - $9,150 24% 20.1% $9,151 - $12,500 35% 24.1% $12, % *Assumes taxable income equals top of the taxable income range 27

28 Children under 18 ( Kiddie Tax ) Taxable Income Marginal Rate Average Rate* $0 $2,550 10% 10.0% $2,551 - $9,150 24% 20.1% $9,151 - $12,500 35% 24.1% $12, % *Assumes taxable income equals top of the taxable income range 28

29 Long-Term Capital Gains & Qualified Dividends Single Joint Rate % Up to $38,600 Up to $77,200 0% $38, ,800 $77, ,400 15% Over $425,800 Over $479,000 20% 29

30 Medicare Premiums 2016 MAGI (Single) 2016 MAGI (Joint) Part B Part D < $85,000 < $170,000 $ $0 $85, ,000 $170, ,000 $ $13.00 $107, ,500 $214, ,000 $ $33.60 $133, ,000 $267, ,000 $ $54.20 > $160,000 > $320,000 $ $

31 Changes to Tax Deductions Medical Interest Taxes Charity Other Itemized 31

32 Standard Deduction 2017 Single: $6, Single: $12,000 Joint: $12,700 Joint: $24,000 32

33 Personal Exemption 2017 $4,050 per person 2018 None 33

34 Itemized Deductions - Medical Unreimbursed Medical Expenses % of AGI % of AGI 34

35 Itemized Deductions - Interest Home Mortgage Home Mortgage (Held prior to 12/31/17) Home Equity Line of Credit (HELOC) Limit $750,000 Limit $1,000,000 Not Deductible 35

36 Itemized Deductions - Taxes State and Local Taxes (SALT)* 2017 No Limit 2018 $10,000 Maximum *Includes state and local, sales, real estate, and property taxes 36

37 Itemized Deductions - Charitable Cash and Stock Donations % of AGI % of AGI 37

38 Itemized Deductions - Other Miscellaneous Deductions subject to the 2% AGI Limit will be eliminated for tax years 2018 through Examples: Tax Preparation Expenses Unreimbursed Employee Expenses Investment Fees Casualty and Theft Losses 38

39 Itemized Deductions - Phaseouts Phaseouts for itemized deductions have been eliminated for tax years 2018 through Phaseouts began at Single - $261,500 Joint - $313,800 39

40 Presidential Disaster Losses For years 2016 and 2017 Up to $100,000 total Can withdraw from 401k, 403b, or IRA with 10% penalty if under 50 Can pay tax over 3 years Can recontribute funds within 3 years Can deduct losses in addition to standard deduction 40

41 Child Tax Credit 2017 $1,000 per child 2018 $2,000 per child Maximum AGI for Full Credit AGI Where Credit Disappears Single $200k $240k Joint $400k $440k 41

42 Alternative Minimum Tax (AMT) Exemption* 2017 Single - $54, Single - $70,300 Joint - $84,500 Joint - $109,400 *Exemption is still subject to income phase outs. 42

43 529 Plans Now, you can use up to $10,000/year for Elementary Schools Secondary Schools Private and Religious Schools 43

44 Annual Gift Exclusion Individual - $14,000 Individual - $15,000 Joint - $28,000 Joint - $30,000 44

45 Estate Tax Exemption Individual - $5.49M Individual - $11.20M Joint - $10.98M Joint - $22.40M *Portable 45

46 Tax Strategies to Consider Contribute to Roth IRA via Traditional IRA Convert Traditional IRA funds to Roth IRA Net Unrealized Appreciation (NUA) transfers from 401(k)s Sell stock at 0% Long-Term Capital Gains rate Single Taxable Income < $38,600 Joint Taxable Income < $77,200 46