Organizer Letter 2018

It’s that time of year again to begin tax planning!

With the new tax law taking effect on January 1, 2018, there are many changes and planning opportunities. Minimum health care coverage is required and must be reported on your personal tax returns for 2018. There are substantial penalties for not maintaining minimum health care coverage in 2018. The penalties do not apply for the 2019 tax year.

Taxpayers that have a financial interest or signature authority in foreign bank and financial accounts which exceed $10,000 at any time during the year are subject to FBAR reporting. Substantial penalties and possible criminal penalties may result for noncompliance.

The annual gift tax exclusion increases to $15,000 for 2018. The estate and gift tax exemption for 2018 is

$11,180,000.

The personal exemption for 2018 has been eliminated. The standard deduction for single and married filing separately is $12,000, $18,000 for heads of households and $24,000 for married filing jointly for 2018.

Maximum earnings for 2018/2019 without loss of social security benefits increases from $17,040 in 2018 to $17,640 in 2019 for individuals below the normal retirement age, and from $45,360 to $46,920 in 2019 for the year the individual reaches normal retirement age, which ranges from age 65-67 depending on your date of birth. No loss of benefits will occur after the individual has reached the normal retirement age. Earnings required to earn a quarter of coverage will increase from $1,320 in 2018 to $1,360 for 2019. There is a 2.8 percent cost of living adjustment for 2019.

The following are a few of our suggestions that may reduce your tax liability for 2018:

1. Prepaying state income tax and property tax in 2018 may be more difficult as the new tax law puts a cap on both taxes at $10,000.

2. Miscellaneous itemized deductions are no longer deductible including unreimbursed employment expenses.

3. Equity lines of credit on homes (Heloc’s) are no longer deductible, but we can discuss exceptions.

4. Pay charitable contributions by credit card at year end to deduct donations in 2018, even though they are not paid until 2019. Donations of appreciated property are deductible in full at their fair market value for regular and alternative minimum tax. Asset must have been held more than twelve months.

5. The deduction for meals, but NOT entertainment, remain the same at 50%, but there are new stipulations to meet the business meal threshold.

6. Maximum contributions to 401(k) plans for 2018/2019 are $18,500 for 2018 and $19,000 for 2019 for individuals under age 50, and $24,500 for 2018 and $25,000 for 2019 for individuals age 50 and over. For the self-employed, open a Sep IRA Plan by December 31 and you can wait to contribute your money until you timely file your return.

With the Roth IRA, there is no current deduction but withdrawals will be tax free. The traditional IRA

remains available. The cap per person remains at $5,500, but will increase to $6,000 in 2019. For individuals over 50, it remains at $6,500, but will increase in 2019 to $7,000. We can assist you with deciding which IRA is best for you.

If you mail in your organizer early, it will save money for you and time for us. Please be aware, if you email us any sensitive information, you need to password protect the information for your safety. If you are unable to password protect your information, please fax it to our office at 626-448-2005.

Our tax organizer is enclosed. If it is completed prior to the interview we can look for extra deductions instead of getting bogged down determining commonly known items. We can also discuss new and extended credits and deductions, educational incentives available and estate tax planning including living trusts. One final recommendation, please call early for tax planning at (626)448-2500.

The earlier you come in, the more time we will have to be of assistance to you in order to utilize all the tax saving techniques for your individual needs.