Tax Planning in a New World

2018 has brought a radically redesigned tax structure and has eliminated or reduced the impact of a number of the traditional year-end planning strategies.

That said, your 2018 tax has probably gone down, maybe considerably, due to the lower tax rates – but IRS withholding is much lower. Some of you may even owe!


The most important step to take now:

Check your withholding! 

You can use the IRS calculator or send me a recent paystub through my secure portal. If you had a bonus, stock option exercise or some other non-recurring income this year, it’s not safe to assume that your withholding will be adequate. Plan now & avoid an unpleasant March/April surprise!

Big changes include an increased Child Tax Credit for kids under 17, now available on incomes to $400,000. Dependents over 16 get a $500 tax credit; this makes up some of the loss from the repeal of personal exemptions for you & your children.

And fewer of you will be itemizing deductions, for better or worse.

If you have losses in your non-retirement investment accounts, the $3,000/year tax loss deduction still works, so consider selling losers before year-end. Or with lower rates, maybe it’s time to harvest gains.

If you need an investment account check-up and advice on what to sell, Jim Iverson CFA® still has time to assist! Please call or email us now.

Married Couples

The standard deduction of $24,000 will be hard to exceed given the $10,000 limit on state & local income and property taxes – unless you pay mortgage interest over $10,000-$15,000 or have very high medical expenses.  By all means, make charitable contributions as you feel moved to but don’t expect the government to pick up a share.  Going forward, a bunching strategy may work for some of you to itemize in alternate years.  Please let’s talk about that when we get together in 2019. For now, increase your 401(k) contribution & if you have access to a Health Savings Account, max that out before year-end.


The standard deduction hurdle is lower at $12,000 with the same $10,000 limit on deductible taxes. Many of you should continue to track your charity and make that year-end Goodwill run, especially if you own a house with a mortgage!  The worksheet is on the new website. There may be value in a bunching strategy for you as well. 401(k) and Health Savings Account contributions always reduce your tax too!


If you’re over 70½ and didn’t in 2018, plan to make 2019 charitable contributions directly from your IRA Required Minimum Distribution. This will preserve the tax effect of the donation and lower your gross income for Medicare premium calculation, Social Security taxability and other thresholds.  There may still be time if you haven’t taken your 2018 RMD yet, but call us or talk to your IRA custodian right away.

If you’re at least 65, your standard deduction is higher also.

Between retirement and the onset of RMD’s, there are other opportunities to lower lifetime tax or benefit your heirs. Let’s talk.

Business Owners

You have a new deduction for 20% of your taxable income!  The Qualified Business Income Deduction gets complicated at higher incomes (~$300,000+) but it’s pretty straight-forward below that.  You still have the ability to drive your tax with last-minute revenue & expense timing and investments in equipment, too. Retirement contributions can be made until the filing deadline. Call or email to discuss.