by Andrew D. Schwartz, CPA

Let’s start with the usual advice we dole out each year.

Max out your 401k or 403b at work.

  • The retirement savings accounts remain the best tax shelter available to working people
  • Salary Deferral Limit increased to $18.5k for 2018
  • People 50 or older can contribute $24.5k
  • Can borrow against your 401k under certain circumstances if necessary

You might also consider increasing gifting to kids and grandkids, including for 529 plans, since the Gift limit increased to $15k per gift recipient for 2018.

Who is saving money under the new tax rules?

Let’s just say that based on what I’ve seen so far, the more you earn the more you save. Married couples with kids earning good money seem to see the largest tax savings. The middle class won’t be realizing much or a tax savings at all

What are some of the the new tax breaks?

  • Lower tax rates across the board
  • Child tax credit doubled in amount to $2k per child under the age of 17 while the income limit almost quadrupled to $400k for married couples and a new $500 per older child and other dependent was added
  • The dreaded Alternative Minimum Tax won’t apply to many people any more

Which popular tax breaks got eliminated for 2018?

  • State and local taxes in excess of $10k annually
  • Job related moving expenses
  • Employee Business Expenses for W2 employees
  • Investment fees and tax prep fees
  • Alimony for divorces finalized as of 1/1/19
  • Mortgage interest on new loans in excess of $750k
  • Interest on equity loans not used to improve that residence.

What about deducting entertainment as a business expense?

The deduction for entertainment expenses is no longer allowable. Some speculate that this is due to Trump not being awarded an NFL franchise when the USFL ended and he wanted his New Jersey Generals to join the NFL.

Please note that business meals continue to be tax deductible.

Any Advice Regarding the New Tax Rules?

  • Many of the rules are set to “sunset” in 7 years
  • Even so, learn the rules
  • Start tax planning in 3-year blocks – especially if you are married, don’t have a huge mortgage, and give to charity or have significant medical expenses
    • Time your mortgage payments to make 13 payments in years you will itemize
    • Bunch your medical expenses if you will exceed the 7.5% threshold (in 2018 increasing to 10% in 2019) and will itemize

Bunch charitable donations to every 3 years. Take advantage of Charitable Gift Trusts to maximize deductions while still spreading out donations.