2018 Year End Financial Planning

Planning will be a lot different than years prior following the first full year after the implementation of the Tax Cuts and Jobs Act, says Senior CFP Board Ambassador Jill Schlesinger, CFP®

As consumers begin thinking about year-end financial planning, it’s important to address the changes brought about by the Tax Cuts and Jobs Act (TCJA) that will affect each American differently. The good news is that for millions of Americans, the new code should make filing easier since nearly 90 percent of taxpayers are likely to claim the standard deduction this year, says Senior CFP Board Ambassador Jill Schlesinger.

“There are plenty of changes to confront before beginning the progress,” says Schlesinger. “Instead of taking a stab at your 2018 tax return, a good place to start is pulling last year’s returns and determining two very important factors: how your 2018 and 2019 income compare with 2017 and if you’re likely to itemize or take the new, higher standard deduction based on last year’s deductions.”

Whether you choose to itemize or claim the standard deduction, Schlesinger shares tips to make the most of your money with the new protocols in place:

• Itemize Deductions in Bunches: Many itemized deductions of the past have been scrapped, including unreimbursed employee expenses, tax preparation fees, job search expenses and more. The change in itemized deductions makes the concept of “bundling” deductions much more important – if you can bunch future itemized items into one year, you may be able to itemize again.
• To Claim or Not to Claim the Standard Deduction – That is the Question: For those claiming the standard deduction or have higher income in 2018 than they will next year, the best way to reduce your tax liability is to maximize your retirement plan contributions. If your income has stayed the same or dropped this year, you may have a unique opportunity to execute a full or partial Roth IRA conversion, where you pay taxes at today’s rates, rather than wait until later in life when you may be in a higher bracket.
• Move Up Planned Charitable Contributions: The tax law is expected to reduce the marginal tax benefit of giving to charity by more than one-quarter in 2018, but if you give one lump sum representing your gifts for the next few years, you may recapture the tax benefit. One easy way to accomplish this is by establishing a donor advised fund (DAF), which allows you to make multiple years’ worth of donations up front.

Read Schlesinger’s full blog post here with more details.

For more guidance on year-end financial planning, talk to a CERTIFIED FINANCIAL PLANNER™ professional today or visit www.letsmakeaplan.org