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A Better Partnership


Jul 2019
July 10, 2019

Lessons from the 2018 Tax Season

Now that we have completed the first tax filing season following the 2017 Tax Cuts and Jobs Act (TCJA) changes, we can reflect on the surprises and the lessons learned to help in planning for 2019. Note that making changes to your tax strategy now gives you more time to spread out the impact from these changes.
Hopefully, the “Top 10 Lessons” below from 2018 can help you start conversations with your planning professionals about your tax strategy for 2019. 
1. Organizing receipts not necessary for many
Gone are the days of presenting your accountant with a shoebox of receipts at tax time. The higher standard deduction and the loss of some common itemized deductions mean that many people no longer have enough deductions to itemize.
2. AMT is gone for most  
The changes to the Alternative Minimum Tax (AMT) excluded most middle-class taxpayers from having to pay it this year and resulted in excessive withholding for some.
3. Withholding should be updated
The TCJA’s changes led the IRS to update the withholding tables used by employers. This update caused some people to have too much withheld (thus giving Uncle Sam a nice interest-free loan for the year) or too little withheld (making them owe taxes and underpayment penalties). Use the withholding calculator available at to determine your needs this year, and complete a new W-4 form for your employer, if needed.
4. Bundling donations can hurdle the Standard Deduction
If you don’t have enough deductions to itemize anymore (or you expect a future large tax bill), you can save up and “bundle” the charitable contributions you would have made over multiple years into one donation large enough that you can itemize that year and take the deduction. Consider using a Donor Advised Fund for this, as it provides a write off for the donation year but allows you to spread your support to charities over multiple years.
5. Bigger retirement contributions allowed
Utilize the $500 increase to the maximum annual retirement plan contributions to put additional money into both your 401(k) and IRA. Adjust your contribution amount ASAP to spread it over as many paychecks as possible.
6. HSAs provides triple tax benefits
With the high standard deduction, many families do not accumulate enough medical expenses to be able to deduct them. In 2019, a health savings account (HSA) plan lets you make up to $7,000 in tax-favored contributions to an account for a family’s medical expenses ($3,500 for an individual). The best part: the money goes in pre-tax, it grows tax-free and withdrawals for medical expenses are not taxed. If your plan deductible is at least $1,350 for individuals or $2,700 for a family, you qualify to open an HSA.  
7. 529 plans - not just for college anymore
The TCJA allows using up to $10,000 per 529 account per year toward K-12 tuition for private or parochial schools. A 529 contribution is a great way to use up some of that $15,000 annual gift tax exclusion for each child or grandchild.
8. Changing business classification may lower taxes
Whether you are starting a business or already own one, the changes to business taxes from TCJA should be discussed with your attorney to determine if you are using the entity classification that provides you with the best tax advantages.
9. Save by contributing RMDs directly to charity
If you choose to donate all or part of your required minimum distribution or RMD (up to $100,000) directly from your traditional IRA to charity, rather than receiving the RMD and paying tax on it first, the donation still counts as your RMD, but it does not add to your taxable income and goes to the charity tax-free.  This has the added benefit of not only reducing your federal taxes, but also your state taxes.
10. Home mortgage size matters
If you are shopping for a home this year, keep in mind that interest can only be deducted on the first $750,000 of your mortgage. 
If your taxes owed were larger or smaller than you expected in 2018, it is time to make the changes to improve your situation for the 2019 filing season. Of course, there are plenty of caveats to understand for each of these action items, so discuss items of interest with your attorney before implementing to make sure you understand how each will affect your overall tax situation and estate planning.

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