2018 brings several tax law changes. Have you updated your financial plan and strategies accordingly? Proper planning allows you to maximize the value of your estate. Here are a few 2018 tax law updates and how they may prompt financial planning changes.
Standard Deductions Increased
The standard deduction is doubling this year. This means that the threshold for taking the standard deduction versus itemizing your deductions is much higher. You may want to change payments made for charitable contributions, medical expenses, etc. based on whether you intend to itemize or take the new standard deduction.
Local Tax Deduction Limited
Only $10,000 of state and local taxes are deductible based on 2018 tax law. This includes income taxes, property taxes, etc. If you intend to buy and/or sell a home this year, will this change your decision on which communities to buy in or the types of homes to consider?
529 Accounts Expanded
529 accounts were previously restricted to college education. As of 2018, they can also be used for elementary, middle, and high school education. Among potential financial planning changes for 2018 is to contribute more to these accounts, especially if you are paying for private schooling for your children.
Estate Tax Thresholds Increased
The estate tax threshold has been temporary increased to $11.2 million per person (or $22.4 million per couple) through 2024. This means that any estates valued below that will not be subject to federal taxes. However, the Massachusetts estate tax limit is much lower. It remains important to employ financial instruments, such as trusts, to minimize estate tax liability. Discuss any necessary financial planning changes with your attorney.
More Financial Planning Changes for 2018
The above are just a few important 2018 tax law updates. For a full understanding of all components of the law and how they may impact your 2018 taxes, contact your accountant. Planning ahead of time will allow you to make critical adjustments during the year and reduce your overall tax liability. You will also want to contact your estate planning attorney to review your estate plan, as that often relates to your ongoing financial planning strategies.