Single Point of View

Single Point of View is our way to occasionally share planning ideas relating to personal finance. Our goal is to pass along concepts that you may not be exposed to on a daily basis.

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Update: Year-End Tax Reform Planning

Last week we summarized the House and Senate proposals for the Tax Cuts and Jobs Act (http://www.spcfo.com/single-point-of-view-blog/entry/singlepointofview/year-end-tax-reform-planning.html) including Action Steps relating to your year-end tax planning.  Since then, the House and Senate reconciled a final tax bill and, as of yesterday, the bill has been approved by Congress.  Below are the details of the final bill. Standard Deduction The standard deduction will increase from $6,350/$12,700 to $12,000/$24,000 for single filers and married filers, respectively.  State & Local Tax Deductions Individuals are entitled to take state and local tax deductions, including property taxes, up to $10,000. Mortgage Interest Deduction Mortgage interest will be deductible on up to $750k of principal loan amounts.  Existing mortgages taken out as acquisition debt will be ‘grandfathered’ in under the old rules (deductible up to $1M of acquisition debt).  Home equity indebtedness will not qualify for the mortgage interest deduction and existing equity loans will not be...
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Year-End Tax Reform Planning

Given the passage in both the House and Senate of the Tax Cuts and Jobs Act, the stakes for year-end tax planning are higher than usual.  We do not know what final legislation will look like when it comes out of reconciliation but there are themes in the House and Senate tax bills that give us insight into beneficial tax moves to make prior to year-end.  We’ve highlighted some of the proposed changes and related planning opportunities to consider. Deductions Both the House and Senate plans agree on increasing the standard deduction amount, nearly doubling the current allowance:   Current (2018) House Senate Single $6,500 $12,200 $12,000 Married $13,000 $24,400 $24,000 Head of Household $9,550 $18,300 $18,000 On the flip side, the proposed legislation makes significant changes to expenses that are allowed as itemized deductions.  Some notable changes include: Medical expense deduction – the House bill eliminates the deduction completely while...
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IRS Guidance on after tax 401k contributions and Roth conversions

The last quarter (or so), we tend to be very focused on tax planning. (Not to be confused with tax accounting in the first quarter or so). With that, it is very timely that last week the IRS issued guidance (Notice 2014-54) on rolling out after tax contributions from a 401k plan. KEY POINT In its guidance, the IRS stated that a retirement plan participant has the ability to convert their "after tax" account into a Roth IRA tax free. Here is a link to the referenced notice:http://www.irs.gov/pub/irs-drop/n-14-54.pdf  Background: 401k-Employee Contribution Types To understand the significance of this, we must first understand the types of employee contributions that may go into a plan. For more information on contribution types, see the IRS link below.Pretaxhttp://www.irs.gov/Retirement-Plans/Plan-Participant,-Employee/Retirement-Topics-ContributionsAs a plan participant, you have the option of contributing to your plan on a pretax basis. This will allow you to take a deduction on your personal taxes.AftertaxYou may...
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