Tax Tips and Updates for the 2019 Filing Season
South Carolina | As we enter a new year, it’s time to start thinking about smart tax moves to help minimize what you’ll owe Uncle Sam on April 15, 2020. Given the fact that the 2017 Tax Cuts and Jobs Act went into effect only last year, taxpayers are still learning the ins, outs and potential undiscovered advantages of the plan. For example, if you did not itemize deductions on your previous federal return, your state tax refund will be tax-free. Find out more information on Tax Tips and Updates for the 2019 Filing Season here…
Bear in mind that other clarifications have come to light since the law was passed, such as deducting interest on a home equity line of credit. However, if you actually used the money from a home equity loan to repair or renovate your home, the interest on that loan is still deductible.
We recognize that tax planning is an onerous task, made more difficult by changes in tax law. If you are wondering how any changes in your investment portfolio may affect your taxes, please give us a call. If we don’t have the exact tax expertise you need, we can help point you in the direction of someone who does.
In addition to doubling the standard deduction, the Tax Cuts and Jobs Act reduced individual income tax rates to between 12% and 37%. However, these cuts are scheduled to expire in 2026. In recent months, the Trump administration has proposed dropping the marginal rate even lower for the current 22% income tax bracket, down to 15%. While this appears to be a strong carrot entering the 2020 campaign year, there’s been no clarification as to how this tax cut would be paid for and, given that it would add roughly another trillion dollars or so to the federal debt throughout the next decade, is not likely to gain traction in Congress.
If you traditionally deducted substantial mortgage interest as well as state and local real estate and income taxes, you may have seen a noticeable difference in last year’s return. The Tax Cuts and Jobs Act capped these federal deductions at $10,000, which some real estate analysts say is responsible for lower home valuations in some parts of the country.
It’s also important to stay abreast of the tax-related ins and outs of inherited IRAs. If you are the deceased account owner’s spousal beneficiary, you have several options — one being that you can basically treat the account as your own. However, if you’re a non-spouse beneficiary, your options are limited. Currently, you can either take distributions based on your own life expectancy — the “stretch option” — which allows the funds to continue growing tax-deferred in the account; or, you must liquidate the account within five years of the original owner’s death. Note that as of 2019, Congress is currently considering legislation that would eliminate the stretch option and require full liquidation within 10 years of the account owner’s death | Tax Tips and Updates for the 2019 Filing Season
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