Financial Planning and Tax Reform

January 11, 2018 8:00 am


As most of us know, on January 1st, 2018 a not so “simple” tax reform went into effect. We recommend in order to get the most benefit from the changes, while avoiding mistakes under them, you may need to update your tax and financial strategies right away. Here are some FAQs to help navigate these recent changes:

What is CAM’s philosophy regarding this fundamental tax reform?

The broad range of new income tax provisions since the 1986 tax reform effort has led to compliance hurdles for taxpayers, administrative complexity, and enforcement challenges for the IRS.  We encourage Congress to examine all aspects of the tax code to continue to improve the current rules. We stand for a code that is simple, practical, and administrable (AICPA Guiding Principles of Good Tax Policy). While we are not accountants or tax preparers, we support tax reform simplification efforts because we are convinced such actions can significantly reduce taxpayers’ compliance costs and encourage voluntary compliance through an understanding of the rules.

Some of us own pass-through entities, but I hear there are big changes in the C corporation area. Should I convert these entities to C Corporations even though there will be a second layer of tax?

Now that the legislation has been passed by Congress and signed by the President, you may want to consider changes to your taxes. The legislation as passed has the corporate tax rate at 21%, effective in 2018.  The legislation repeals the corporate alternative minimum tax (AMT) and provides for pass-throughs, a 20% income deduction.

I am someone who is close to being subject to estate taxes. Did the estate tax go away?

Eliminating the estate tax was high up on the Republican tax agenda and was part of the Republican Blueprint and the House November 16, 2017 version of the Tax Cuts and Jobs Act. However, the legislation, as passed by Congress and signed by the President (enacted on December 22, 2017), does not eliminate the estate tax.  Rather, the tax exemption amount is doubled from $5.6 million to $11.2 million per person for 2018 through 2025.

How will tax reform impact individual tax payers?

The impact of the bill from 2018 through 2025 on individual taxpayers include:

the top individual rate is 37%

the individual AMT remains but with increased exemption amounts and increased phase-out levels

the mortgage interest deduction limit is reduced to $750,000 on new mortgages and no home equity loan interest deductibility

individuals are allowed to deduct up to $10,000 in total state and local taxes, which include income or sales tax plus property taxes

the child tax credit is increased to $2,000, with up to $1,400 refundable

medical expenses in excess of 7.5% of AGI are deductible in 2017 and 2018 and then 10% of AGI thereafter

no personal exemptions deductible

no moving expenses deductible

no alimony taxable or deductible starting in 2019

no miscellaneous itemized deductions

no PEASE phase-out of itemized deductions

As a result of tax reform, we expect this will have some impact on many of you. Our goal is to identify tax strategies and planning opportunities as we help our clients navigate these changes.

We appreciate our relationship with you and as always we are here to help.



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Source:  Bloomberg, AICPA. M & A Consulting Group, LLC, doing business as CAM Investor Solutions is an SEC registered investment adviser. We provide financial planning and investment information that we believe to be useful and accurate. However, there cannot be any guarantees. There are many different interpretations of investment statistics and many different ideas about how to best use them. Nothing in this presentation should be interpreted to state or imply that past results are an indication of future performance.

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This post was written by Marc Jimenez, CFA, CFP®

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