February 10, 2019
It's Time to Schedule Your Tax Appointment
We are now taking appointments for the 2019 income tax season. Even if you haven’t yet received all of your statements, we recommend scheduling early in order to find a time that’s convenient for you.
Tax Season Is Here Again
The Tax Cut and Jobs Act (TCJA) of 2017 goes into effect this year. Listed below are some of the ways tax deductions and credits have changed. For advice on how these and other tax regulations may affect your specific situation, please contact us at (203) 967‑2231 or use this form to request an appointment with your advisor.
This year you will notice sweeping changes to tax deductions. One major change is many of the itemized deductions you may have taken in the past are no longer available. Here are eight deductions you can no longer take:
- Children and other dependents. For 2018, you can no longer take a $4,050 deduction for each dependent you claim. The loss of deduction may be partially or fully offset by an increase in the standard deduction. An increase in the child tax credit may help, too, but it isn’t available to all families, reported Maryalene LaPonsie of U.S. News & World Report.
- State and local tax deductions, including property taxes. There is a $10,000 cap on state and local tax deductions, which may negatively affect people in states with high property taxes. Some states have been introducing legislation and researching options that may help offset the loss of this deduction.
- Mortgage interest deductions. For 2018, there is a lower dollar limit on mortgages qualifying for the home mortgage interest deduction. Taxpayers may only deduct interest on $750,000 of qualified residence loans. In previous years, the limit was $1,000,000.
- Home equity loan interest. If you use a home equity loan to build an addition to an existing home or otherwise improve your home, interest on the loan may be deductible. However, through 2026, if the loan is used for something other than home improvements, the loan interest is not deductible. The home equity loan must be secured by the taxpayer’s home.
- Unreimbursed employee expenses. Prior to 2018, money paid out-of-pocket for supplies, education, or other work-related expenses that were not reimbursed by your company, could be deducted up to 2 percent of adjusted gross income. That is no longer the case, reported Bill Bischoff of MarketWatch.
- Various other itemized deductions. In the past, you may have deducted the cost of tax preparation services, safe deposit box rentals, investment fees, IRA/custodian fees, hobby expenses, and other items. Check with your tax professional to be certain, but many are no longer deductible.
- Moving expenses. Relocating just became less attractive from a tax perspective. Through 2026, unless you are with the armed forces, you will no longer be able to deduct moving expenses that are not reimbursed by your employer.
- Alimony payments. If you get divorced after December 31, 2018, you will not be able to deduct alimony payments. Conversely, recipients of alimony payments may no longer pay taxes on the income, according to Lorie Konish of CNBC.
To offset these new exclusions, standard deductions almost doubled for 2018. Under the new law, individuals who file taxes singly may be able to deduct $12,000, heads of household may be able to deduct $18,000, and married couples filing jointly may be able to deduct $24,000.
In addition, TCJA increased the Child Tax Credit to $2,000 for each qualifying child, double what it was in the past. In addition, the income limits for eligibility begin phasing out at $200,000 of modified gross income (up from $75,000) for a single filer, and $400,000 (up from $110,000) for married couples filing jointly.
Also, if you have dependent children who are 17 or older, or you support parents or other relatives, you may be able to take a tax credit of $500 for each qualifying person through 2025.
While the loss of deductions may increase taxes for some, the Brookings Institute reported, “… in 2018, the TCJA will raise average after-tax income for households in every income group. Households in the lowest 20 percent of the income distribution (about $25,000 or less) will receive an average tax cut of $60, while those in the top 0.1 percent (with income of $3.4 million or more) will get an average tax cut of about $193,000.”
This article does not explain all of the changes introduced by tax reform nor is the information provided intended to be tax advice. You can find additional information about tax law changes on the IRS website. Also, it’s a good idea to talk with a tax professional about how tax reform may affect you.
Caution: Watch Out for Tax Season Scams and Threats
During this tax season, as in every tax season, be wary of tax scams. Tax fraud is the second most common type of identity theft, according to the Federal Trade Commission’s Consumer Sentinel Data Book 2017.
Scammers often impersonate IRS officials on the phone or in email and snail mail communications. They may make false claims about the status of your taxes in an effort to get you to share personal information. Don’t fall for it. The IRS does not make threatening phone calls about unpaid taxes. It does not demand immediate payment or ask you to update information online.
If you think you have been the victim of a phone scam, contact the Federal Trade Commission on FTC.gov. You can also report unsolicited communications claiming to be from the IRS by emailing email@example.com.
Sean M. Dowling, CFP, EA
President, The Dowling Group Wealth Management
Please feel free to forward this commentary to family, friends, or colleagues. If you would like us to add them to the list, please reply to this e-mail with their e-mail address and we will ask for their permission to be added.
- Government bonds and Treasury Bills are guaranteed by the U.S. government as to the timely payment of principal and interest and, if held to maturity, offer a fixed rate of return and fixed principal value. However, the value of fund shares is not guaranteed and will fluctuate.
- Corporate bonds are considered higher risk than government bonds but normally offer a higher yield and are subject to market, interest rate and credit risk as well as additional risks based on the quality of issuer coupon rate, price, yield, maturity, and redemption features.
- The Standard & Poor's 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. You cannot invest directly in this index.
- All indexes referenced are unmanaged. Unmanaged index returns do not reflect fees, expenses, or sales charges. Index performance is not indicative of the performance of any investment.
- The Dow Jones Global ex-U.S. Index covers approximately 95% of the market capitalization of the 45 developed and emerging countries included in the Index.
- The 10-year Treasury Note represents debt owed by the United States Treasury to the public. Since the U.S. Government is seen as a risk-free borrower, investors use the 10-year Treasury Note as a benchmark for the long-term bond market.
- Gold represents the afternoon gold price as reported by the London Bullion Market Association. The gold price is set twice daily by the London Gold Fixing Company at 10:30 and 15:00 and is expressed in U.S. dollars per fine troy ounce.
- The Bloomberg Commodity Index is designed to be a highly liquid and diversified benchmark for the commodity futures market. The Index is composed of futures contracts on 19 physical commodities and was launched on July 14, 1998.
- The DJ Equity All REIT Total Return Index measures the total return performance of the equity subcategory of the Real Estate Investment Trust (REIT) industry as calculated by Dow Jones.
- International investing involves special risks such as currency fluctuation and political instability and may not be suitable for all investors. These risks are often heightened for investments in emerging markets.
- Yahoo! Finance is the source for any reference to the performance of an index between two specific periods.
- Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance.
- Economic forecasts set forth may not develop as predicted and there can be no guarantee that strategies promoted will be successful.
- Past performance does not guarantee future results. Investing involves risk, including loss of principal.
- You cannot invest directly in an index.
- Stock investing involves risk including loss of principal.
- These views are those of Carson Group Coaching, and not the presenting Representative or the Representative’s Broker/Dealer, and should not be construed as investment advice.
- This newsletter was prepared by Carson Group Coaching. Carson Group Coaching is not affiliated with the named broker/dealer.
- The foregoing information has been obtained from sources considered to be reliable, but we do not guarantee it is accurate or complete.
- Consult your financial professional before making any investment decision.
https://www.irs.gov/pub/irs-pdf/p5307.pdf (Pages 5 and 6)
https://home.kpmg.com/content/dam/kpmg/us/pdf/2018/02/tnf-new-law-book-feb6-2018.pdf (Page 24)
https://www.ftc.gov/system/files/documents/reports/consumer-sentinel-network-data-book-2017/consumer_sentinel_data_book_2017.pdf (Pages 5 and 6)
IRS Circular 230 Disclosure: Pursuant to requirements imposed by the Internal Revenue Service, any tax advice contained in this communication (including any attachments) is not intended to be used, and cannot be used, for purposes of avoiding penalties imposed under the United States Internal Revenue Code or promoting, marketing or recommending to another person any tax-related matter. Please contact us if you wish to have formal written advice on this matter.
ADV & Investment Objectives: Please contact The Dowling Group if there are any changes in your financial situation or investment objectives, or if you wish to impose, add or modify any reasonable restrictions to the management of your account. Our current disclosure statement is set forth on Part II of Form ADV and is available for your review upon request.
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