WTOP Interview: Tax Tricks and Treats: Are You Ready for the Grim Tax Reaper?
Shawn Anderson: 5:12. Halloween could be especially frightening this year if you’re not prepared for the new tax law changes. Fortunately, there’s still sometime before the end of the year to offer a few tricks of your own.
Hillary Howard: Here to help us avoid the grasp of the grim tax reaper and collect a few treats along the way, Nina Mitchell, co-founder of Her Wealth and Senior Wealth Advisor at The Colony Group. How are you, Nina?
Nina Mitchell: Hi, great to be here and happy Halloween.
Hillary: Happy Halloween. Tell us about a few of the tricky tax law changes that could really get folks into trouble if they’re not careful.
Nina: Well, the biggest bag of tricks relates to itemized deductions and many taxpayers will probably lose the value of itemized deductions, even though they itemized in the past. And they’ll only be able to take the standard deduction, which is $12,000 for single and $24,000 for married filing joint. And three specific changes to itemized deductions, are that state, local and property taxes are capped at $10,000 a year in total. The 2% miscellaneous itemized deductions are no longer deductible and taxpayers may not make as many charitable contributions going forward if they can’t itemize and they don’t get a write-off. So, if you really are charitably inclined, you might want a bunch or combined several years’ worth of donations in one year, to make sure that you’re able to itemize and even better, you’ve appreciated stock instead of cash.
Shawn: Now, we all look forward to getting the treats, right. So, are there any that we should know about right now?
Nina: Well, absolutely. A brand new tax treat for 2018 is that some qualified business owners might be able to deduct up to 20% of their business income from taxes. So, if you qualify, that could be a real treat. But the rules are complicated, so you have to review them carefully with your tax adviser. And of course, one of the best treats is still to maximize your retirement contributions, which includes funding your 401(K) up to $24,500 if you’re 50 or older. And if you’re self-employed, how about opening a solo 401k or SEP IRA this year. Depending on your age and net income, you might be able to fund and write off a maximum of $55,000 to $61,000 for your 2018 tax return.
Hillary: Alright finally, what lessons can we learn from what you’re calling the Grim tax reaper, Nina?
Nina: Well, what’s that lovely saying? “Nothing is certain, but death and taxes”. So, here’s some good news. Most taxpayers will no longer be subject to the dreaded alternative minimum tax, at least through 2025 and the lifetime estate and gift tax exemption has now doubled from 5.5 million last year to 11.2 million per person for years 2018 through 2025. And just one last thing. A lot of people don’t realize that many of the provisions under the current or the new tax law, actually expire on December 31, 2025. So, everything goes back to the old 2017 tax laws. So beware.