Deep in the Heart of Taxes
So, every relationship seems to have the fun one—the cool parent, the fun loving spouse, the crazy sister…and, as you may have already guessed, Nathan is the fun partner here. He posts about cool beer toting burros or cult shows like Stranger Things. I post about tax reform. Sorry.
As you may have heard in the news, the House Republicans released their long awaited tax reform bill last week. Without digging into the detail of the 400 page bill that is cure to be parsed and dissected fully in the Senate, some of the main highlights were:
- No changes to capital gain or investment income rates.
- Elimination of the dreaded Alternative Minimum Tax.
- Elimination of Federal Estate Taxes…in 2024.
- Elimination of most deductions and credits, while preserving the home interest deduction, retirement plan deduction, and doubling the standard deductions.
- Condensing seven tax brackets into four:
While these changes are far from actual implementation, they do confuse year end tax planning a bit. Many times, tax strategy involves accelerating or delaying deductions to offset years with large tax liabilities. However, if the deductions allowable for 2018 are in limbo, then delaying deductions to 2018 could be ill advised.
Likewise, accelerating income to “top off” a current low bracket is also a common strategy. Roth conversions or accelerated IRA withdrawals in a year with income under the 15% bracket limit are usually smart ideas. However, with lower potential tax rates next year, accelerating income seems less prudent.
While it would be nice to know the tax rules we are planning for in 2018, we also acknowledge that this House bill has a long way to go—we are only at the red line on this nice road map drawn by Fidelity:
So, we will keep our eyes on this bill as it moves through the process…well, let’s be honest…I will keep my eyes on this bill while Nathan writes cooler blogs on making beer or 1990’s song or gear references… 😉