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Kiddie Tax Reform: Simplified, But At What Cost?

By IndividualsNo Comments

“Kiddie Tax” refers to special rules and taxes imposed on the unearned income of certain children. While the kiddie tax is nothing new, recent tax reform has completely revamped and simplified the way this tax is calculated for tax years 2018 through 2025. These new rules could drastically increase the amount of tax paid on investments made in your child’s name. It is important to understand this new legislation in order to make the most of any investments made for the benefit of your child.

Kiddie tax applies to any child whom:

  • is required to file a tax return;
  • does not file a joint return for the tax year;
  • has investment income greater than $2,100 (for 2018);
  • either of the child’s parents is alive at the end of the year; and
  • is either: (a) under the age of 18; (b) under the age of 19 and does not provide more than half of his or her own support with earned income; or (c) under the age of 24, a full-time student, and does not provide more than half of his or her own support with earned income

Essentially, this taxed the child’s unearned income at the parent’s maximum marginal tax rate and was impacted by both the parent’s income and the income of any siblings also subject to the kiddie tax. Unearned income refers to interest, dividends, capital gains, and other investment income.

Recent tax reform has greatly simplified the calculation of kiddie tax. Beginning in 2018, tax on an applicable child’s unearned income will be calculated using the trust tax brackets. Thus, under the provision, the child’s tax is unaffected by the tax situation of the child’s parent or the unearned income of any siblings.

However, trust tax brackets reach their top marginal tax rates much quicker than individual tax brackets. For example, in 2018 a trust will reach the 37% bracket at only $12,500 of income whereas a married couple filing a joint return would not reach this tax bracket until $600,000 of income!

Therefore, the new kiddie tax rules will affect taxpayers very differently and must be considered when deciding how best to shift income from yourself to your child.

For higher income individuals already subject to 35-37% marginal tax rates, this legislation will have very little impact. Whether the portfolio is held by the parent or child, the income will be subject to relatively the same rate if it is in the maximum trust tax bracket. For lower and middle-income families, the impact could be more drastic. For example, for parents falling in the 22% tax bracket, historically the kiddie tax would have been computed at their 22% rate. Under the new legislation using the trust tax brackets instead, it will fall into a 24% tax bracket at just $2,550 of unearned income. The 35% and 37% tax brackets are reached at just $9,150 and $12,500 of unearned income, respectively.

If you have any questions about how the kiddie tax reform could affect your family’s investments, please do not hesitate to contact your L&B professional at (858) 558-9200.

Finalized but not Finished: Updates on Guidance for Tax Reform

By IndividualsNo Comments

We touched on the impact of the Tax Cuts and Jobs Act earlier this year. Click here to see this article. As this tax reform will affect most taxpayers in some way, it is important to understand how the new law may affect you. The Department of the Treasury and the Internal Revenue Service are currently working to provide more detailed guidance on these sweeping changes.

The IRS Priority Guidance Plan provides taxpayers a list of topics for which they plan to issue guidance in their year ending each June 30. The plan can be found on the IRS website and is available for the public to view. We expect more information related to the new Tax Act later this summer, including Qualified Business Income and college savings plans.

Here are some of the new law changes that are on the top of our list.

Alimony

Beginning with divorce agreements signed after December 31, 2018, the tax reform act removes the requirement that receiving spouses need to include alimony received as income, and also removes the deduction applicable to the paying spouse. This will likely result in a higher overall tax for divorcing couples, but the amount of alimony will reduced by the relevant formulas for agreements signed after December 31, 2018.

Alternative Minimum Tax

The Alternative Minimum Tax exemption and phase-out levels have been increased substantially. Along with the elimination of miscellaneous itemized deductions such as brokerage advisor fees, and unreimbursed employee expenses, as well as the limitation of state income and property taxes, a much smaller group of taxpayers will be subject to this alternative tax.

This results in a push for most taxpayers subject to AMT in recent years: the loss of deductions already limited by AMT. For taxpayers previously outside of the grasp of AMT, the loss of deductions will result in higher federal tax.

Charitable Giving

While the deductions for charitable giving, cash and non-cash, remain in place, the benefit received from the deductions may be different. The limit on cash contributions has been raised from 50% of AGI to 60%, to give more capacity to donate. However, it is worthwhile to discuss how much you would need to contribute before you start to see a reduction in tax. With fewer overall itemized deductions and the increase in the standard deduction, the timing of your gifts can increase your tax benefit.

Consider bunching your contributions, instead of giving to charity each year, group the amount from each year into a larger contribution every other year, to increase your overall tax benefit.
Donor-advised funds are also an option. These donations which will give you a large deduction in the year you contribute, but allow you control of when the funds are sent to the charities of your choosing.
Lastly, for any taxpayer that is receiving required minimum distributions from their IRAs (401(k) distributions are not eligible), you can elect to make a contribution (up to $100,000) to a charity of your choice directly from the IRA account. The distribution is nontaxable, essentially directly netting the income and the charitable deduction

State Tax Conformity

As the new tax law rules continue to develop and taxpayers gain a better understanding of the affect the new law will have on their federal taxes, it is important not to lose sight of state taxes. Not every state will choose to conform to the new laws. California, for instance, conforms to the Internal Revenue Code (IRC) as of January 1, 2015. This results in a variety of federal and California income and deduction adjustments. It remains to be seen if this conformity date will change. As such, it will be very important to keep track of the conformity rules in the states where you pay taxes.

In addition to conformity issues, a few states are trying creative ways to mitigate the loss of the state tax deduction. For example, CA has proposed to create a charity that would accept donations from resident taxpayers who would receive a credit against their state tax. The result is the conversion of state taxes into charitable contributions. We feel these attempts will fail as the IRS has already indicated they will block these workarounds.

As guidance is released over the summer, it is important to keep your tax planning updated. There are options to help reduce the negative effects, or further increase benefits related to these changes. Please contact us with any questions or concerns related to these updates, and we will be sure to help guide you through the changes and how they will change your tax position compared to prior years. If you have any questions please contact your L&B professional at (858) 558-9200.

Happy Retirement: Is it time to start taking distributions from your retirement accounts?

By IndividualsNo Comments

At some point Treasury needs to tax all of the dollars tucked away in tax deferred accounts. Their solution? The “required minimum distribution” or RMD. While you can generally start taking retirement plan distributions at age 59 ½ without early withdrawal penalties, you have to start taking distribution at 70 ½ to avoid “late” withdrawal penalties. If you are in that window, planning now can make a big difference in the tax rate that applies to those tax deferred dollars.

Required minimum distribution rules apply to SEP IRAs, SIMPLE IRAs, 401(k)s, Profit Sharing plans, 403(b) plans, and other defined contribution plans. ROTH IRAs are not subject to RMDs. Special rules apply to inherited IRAs and Roth IRAs. Taxpayers include the RMD in taxable income.

For IRAs, the distribution must be made by April 1st of the year following the calendar year in which the person turns 70 ½. After the first payment is made, the payment is then due December 31st of each successive year.

For the rest of the retirement plans mentioned above, the distribution is April 1st following the later of the calendar year in which the person:

Turns age 70 ½ or
Retires
Example: John is retired and his 70th birthday is June 30th 2017. John reaches age 70 ½ on December 30, 2017. He must make his first RMD by April 1, 2018. His next payment will be made on December 31, 2018.

The amount of the RMD depends on two factors: life expectancy and the value of each retirement account. The company that is currently holding the individual’s retirement account will usually inform that person of the need to take an RMD and send a Form 1099-R to report the distribution. But be aware, as not all custodians communicate this requirement. If you take less than the required minimum distribution penalties may apply. The amount of the penalty is 50% of the funds not distributed.

Although it is required to take this minimum distribution, individuals are not penalized for taking more. In fact, planning for the timing and amount of your distributions can lower the overall tax rate you might pay on the dollars stashed in your retirement accounts.

Anyone who doesn’t need or want to take the full distribution, should consider giving the remainder to charity. If you make a direct transfer (up to $100,000) from your IRA to a charity, you get to count that money toward your RMD. However, the distribution is not considered income and there is no deduction. Often this netting of income and deduction can create a tax advantage.

It is important to begin planning with advisors regarding RMDs, social security, and capital gains as early as possible. In some cases, the combination of these transactions will push taxpayers into higher brackets and result in unnecessary tax burdens. With proper planning, some of these taxes can be avoided by timing the distributions. If a taxpayer forgets to take their RMD, the IRS may forgive any penalties if the taxpayer was acting in “good faith,” and it is the first time this mistake has been made.

If you have any questions regarding required minimum distributions or anything related to your retirement accounts, please do not hesitate to call your L&B professional at (858) 558-9200.

All in the Family: What You Should Know About Related Party Transactions

By IndividualsNo Comments

Are you considering selling your property to a family member or lending money to your niece for her wedding? Sometimes, a transaction between you and your relative can be favorable for both of you, including lower rates and thus lower taxes on the income. However, there are several things that are worth considering before getting involved with a related party.

Transactions between related parties, such as family members, can include sales and exchanges of property and loans. Even if the sale is completed at arm’s length, the IRS still sees it as a related party transaction, and thus it is subject to the loss disallowance rule. Additionally, the IRS requires that loans between family members be structured like any other loan.

In a related party sale or exchange, the taxpayer is not allowed to deduct a loss. Disallowing a loss on the sale or exchange of property between related parties acts as a deterrent to entering into transactions that have no real economic substance except to avoid tax. This disallowance rule has been upheld by the U.S. Supreme Court. There is no real economic substance if the property is obsolete or the property is sold only in name when in fact ownership is still retained in the family or economic unit.

However, as with every rule, there is an exception. If the buyer sells the property to an unrelated third party, the amount of gain recognized on the subsequent sale can be reduced by the amount of the loss disallowed in the previous sale.

Another transaction that is looked at closely by the IRS, is a loan between related parties. The IRS requires that these loans be structured like any other loan. The rate cannot be lower than the going market rate. The IRS publishes the Applicable Federal Rate (AFR) each month, which serves as the minimum acceptable interest rates for most loans.

If the loan terms are too favorable, such as when the interest rate is deemed lower than the AFR, the IRS can recharacterize that loan as something else, such as a gift, which has different tax implications. The loan might also be subject to below-market loan rules, which means that the lender and the borrower are required to recognize interest income and interest expense based on the relevant AFR rather than on their agreed actual interest rate, for federal tax purposes.

Related party transactions can have unintended tax consequences and the definition of a related party is confusing and detailed. If you think you might be in the category of a related party transaction, or are looking to make such a transaction in the future, we suggest that you are thorough and seek counsel beforehand. If you have any questions regarding this or any other tax matters, please do not hesitate to contact your L&B professional at (858) 558-9200.

All in the Family: What You Should Know About Related Party Transactions

By IndividualsNo Comments

Are you considering selling your property to a family member or lending money to your niece for her wedding? Sometimes, a transaction between you and your relative can be favorable for both of you, including lower rates and thus lower taxes on the income. However, there are several things that are worth considering before getting involved with a related party.

Transactions between related parties, such as family members, can include sales and exchanges of property and loans. Even if the sale is completed at arm’s length, the IRS still sees it as a related party transaction, and thus it is subject to the loss disallowance rule. Additionally, the IRS requires that loans between family members be structured like any other loan.

In a related party sale or exchange, the taxpayer is not allowed to deduct a loss. Disallowing a loss on the sale or exchange of property between related parties acts as a deterrent to entering into transactions that have no real economic substance except to avoid tax. This disallowance rule has been upheld by the U.S. Supreme Court. There is no real economic substance if the property is obsolete or the property is sold only in name when in fact ownership is still retained in the family or economic unit.

However, as with every rule, there is an exception. If the buyer sells the property to an unrelated third party, the amount of gain recognized on the subsequent sale can be reduced by the amount of the loss disallowed in the previous sale.

Another transaction that is looked at closely by the IRS, is a loan between related parties. The IRS requires that these loans be structured like any other loan. The rate cannot be lower than the going market rate. The IRS publishes the Applicable Federal Rate (AFR) each month, which serves as the minimum acceptable interest rates for most loans.

If the loan terms are too favorable, such as when the interest rate is deemed lower than the AFR, the IRS can recharacterize that loan as something else, such as a gift, which has different tax implications. The loan might also be subject to below-market loan rules, which means that the lender and the borrower are required to recognize interest income and interest expense based on the relevant AFR rather than on their agreed actual interest rate, for federal tax purposes.

Related party transactions can have unintended tax consequences and the definition of a related party is confusing and detailed. If you think you might be in the category of a related party transaction, or are looking to make such a transaction in the future, we suggest that you are thorough and seek counsel beforehand. If you have any questions regarding this or any other tax matters, please do not hesitate to contact your L&B professional at (858) 558-9200.

The Good Student Tax

By IndividualsNo Comments

College can be a very exciting time for you and your dependents, but can also cause stress and confusion about tax consequences related to scholarships and education expenses. Many people know that there are tax benefits and credits for paying tuition, but some may not know that there also may be taxable consequences for receiving good grades. Keep reading to find out what hidden tax consequences may be lurking.

Generally, scholarships (or fellowship grants) are free from federal tax as long as they are for a student’s tuition. However, if the scholarship is for tuition and for other expenses, such as room and board, only the portion of the scholarship that applies to tuition is free from tax. You must determine what percentage of the scholarship applies to tuition and what percentage applies to other expenses. Books, fees, and supplies are included in the IRS’s definition of tuition, so any scholarship proceeds that can be applied to these expenses are tax-free. On the other hand, a scholarship may also be used for expenses that are taxable including: room and board, travel, research, non-required equipment and other expenses that are not required for either enrollment or attendance.

Sometimes it is difficult to determine if a fee or expense can be considered a qualified tuition or a related expense. The general rule to determine if a cost is part of qualified tuition, or a related expense, is whether the fee is required to be paid to the eligible education institution for enrollment or attendance. If the fee is optional, or provides a benefit above and beyond what is required, that expense is no longer considered required and therefore not qualified.

Scholarships need not be only for college or university tuition. The same rules govern elementary, high school, and vocational school scholarships. Athletic scholarships also generally qualify for this favorable tax treatment as long as the value of the scholarship does not exceed certain amounts.

Teaching and research stipends, which serve as particularly common ways to lower graduate school expenses, generally do not qualify as scholarships. They must be reported as income, and they are subject to federal tax if they are required as a condition to receiving the qualified scholarship or qualified tuition reduction.

If you have any questions regarding taxability of scholarships or any issues associated with education expenses, please do not hesitate to call your L&B professional at (858) 558-9200.

Why All Foreign Taxpayers Should Be Familiar with Form W-8

By IndividualsNo Comments

Individuals and businesses without US residency or citizenship are generally subject to a flat tax rate of 30% on all US-sourced income. This tax is withheld by the payor, or withholding agent, before any distributions are made – which can make the tax particularly burdensome. Form W-8 and its variations are available to eliminate or reduce this withholding.

Form W-8 – The Basics

Each variation of the form has its own requirements and benefits, but the main purpose of Form W-8 is for foreign persons to certify their foreign tax paying status in order to avoid double taxation and certain automatic tax withholdings. The form is available to non-resident aliens and foreign entities who earn income in the US. It can also be filed by anyone working for a US company who is currently living in a foreign country. Most countries are party to an income tax treaty with the US, which means that those who work for a US company abroad, should expect their employer to request a W-8 to take advantage of treaty provisions. Although a W-8 is an IRS form, it is not actually sent to the IRS but rather to the employer or payor requesting it.

Which form should you submit?

Although there are five W-8 forms in total, Form W-8BEN is the most common and should be filed by anyone in a foreign country that has a tax treaty with the US. To properly complete the form, a taxpayer must provide a US tax identification number and certify the following:

  • Proof of residency in foreign country
  • Beneficial ownership of the income

Once this form is filed, a reduced rate of withholding is then applied. For example, a Canadian resident can claim a reduced withholding rate of 15% on dividend income generated in the US as opposed to the default rate of 30%. Additionally, the taxpayer will generally be allowed to deduct the US withholding on their Canadian tax return.

This form does not have to be filed annually. If originally filed with a US tax identification number, the form will remain valid until any of the information changes. If filed without a US tax identification number, it will remain valid from the date signed until the last day of the third succeeding year, so long as all the information originally filed remains correct.

Another common form is Form W-8ECI, which should be completed by any foreign individual or entity that has income linked to work done in the US. Work that is effectively connected to the conduct of trade or business in the US is not subject to withholding once Form W-8ECI is complete, as it will be includable in the beneficial owner’s gross income for the tax year. Filing this form can prove to be an effective way to increase short-term cash flow and avoid excessive up-front withholdings.

While the IRS notes that at a glance all of these forms may appear “deceptively simple,” it is important to make sure all information provided is complete and free from error. We strongly recommend a thorough review of all information available in order to secure any tax benefits that apply to you. If you have any questions with regards to foreign taxation, or any other tax matters, please feel free to contact your L&B professional at (858) 558-9200.

Deemed Repatriation and What That Means

By IndividualsNo Comments

New Year, new tax laws. Historically, profits earned by a foreign corporation were not taxed in the U.S. until the cash was brought into the country. One provision of the new tax act calls for a mandatory tax on foreign profits that were previously deferred from U.S. tax. In this article, we will outline what this new transition tax entails.

The Tax Cuts and Jobs Act of 2017 (“The Act”) enacted on December 22, 2017 calls for a mandatory one-time deemed repatriation (Section 965) of foreign profits that takes effect for the foreign corporation’s last taxable year that begins before January 1, 2018. Previously, U.S. shareholders would not be taxed on their foreign profits until the cash was brought back into the country, typically through a dividend. Under this new provision, these foreign profits are “deemed” to be brought back to the U.S. There is now a transition tax on foreign corporations’ earnings and profits (“E&P”) accumulated during periods in which such corporation was a foreign subsidiary to the extent such E&P has not been previously subject to U.S. tax.

The deemed repatriation provision applies to all U.S. shareholders in a “specified foreign corporation.” These are generally controlled foreign corporations (“CFCs”) and other foreign corporations that a U.S. shareholder owns 10 percent or more of the voting interest.

The deemed repatriated foreign earnings are taxed at 15.5 percent for cash and liquid assets held by the foreign corporation. The aggregate E&P held in forms other than cash or its equivalents, or illiquid assets are taxed at 8 percent. This rate is lower than the prior tax code’s corporate rate of 35 percent.

The Act allows the U.S. shareholder to elect to pay the net tax liability interest-free over a period of up to eight years. Because the tax liability can be paid in installments, the measurements are allocated as such: 8 percent of the total tax liability is paid every year in the first five years starting in 2017, 15 percent in the sixth year, 20 percent in the seventh, and 25 percent in the last year. Foreign tax credits can be used to reduce the liability to the extent of foreign taxes on the taxable portion of the deemed repatriated earnings.

If you have any questions on how this provision or others of the new tax law might affect you, please do not hesitate to contact your L&B professional at (858) 558-9200.

Keeping Uncle Sam Happy: Requirements for Estimated Tax Payments

By IndividualsNo Comments

A while back, Uncle Sam (The United States Government) realized that it would be impossible to withhold taxes from every dollar a person made.  This was a problem, especially because the IRS works on a pay-as-you-go basis.  As such, it was decided that taxpayers with income not subject to normal payroll withholding, would be required to pay estimated taxes.  Income not subject to withholding include items such as interest, dividends, alimony, self-employment income, capital gains, prizes, awards and more.

Estimated tax payments can be a burden, but are necessary in order to avoid penalties and interest.  Penalties and interest are imposed on anyone who has more than $1,000 in taxes, after subtracting withholding and applicable credits, still due on April 15th.  Estimated tax payments for individuals are due four times throughout the year.  The dates are:

Estimated Tax Due For Income Received
April 15th January 1 – March 31
June 15th April 1 – May 31
September 15th June 1 – August 31
January 15th September 1 – December 31

The IRS allows a couple different methods in calculating estimated tax.  The first method is to simply estimate the tax you will owe for the current year, divide it by four, and send in four equal payments. This method avoids penalties and interest as long as the amount sent in equals 90% or more of the amount owed for the current year.

Another method available to taxpayers is called annualization.  This method allows taxpayers to pay increased taxes when they are earning more money and less when their income is down.  This means the estimated taxes are based on actual income instead of an estimate.   This method is ideal for:

  • Seasonal workers
  • People between jobs or changing jobs
  • Self-employed individuals
  • Anyone that incurs sizable deductions at various times during the year

If the annualization is successful, the individual will determine what their full year’s income would be if they proceeded to earn what they did for that period, and only pay tax on a fourth of that amount.  This method is ideal for cash flow purposes as you pay the tax in the period in which you incur the corresponding income.

A safe harbor method can be used when a taxpayer expects that their income from the current year will be the same or higher than it was in the previous year.  This method is easy to use and only requires knowledge of last year’s tax return and current withholding.  By paying either 100% or 110% of their prior year’s tax liability, taxpayers who are “acting in good faith,” are protected from the penalties and interest assessments.  Taxpayers that are married and have an AGI over $150,000 are required to pay 110%, while anyone making less than that will pay 100%.  If the taxpayer is filing as single, the AGI amount is cut in half.

Taxpayers have the option to pay estimated taxes by paper check or by electronic filing.  In order to pay electronically, taxpayers must sign up with the Electronic Federal Tax Payment System, or use the IRS’s Direct Pay option.  State estimated tax payments may also be required.  As such, it is important to know the requirements in the state you earn income as the payment requirements vary from state to state.

In summary, every taxpayer along with their tax advisor should assess the need to pay estimated taxes in order to avoid additional penalties or interest. If you have any questions regarding this or any other tax matters, please do not hesitate to contact your L&B professional at (858) 558-9200.

The Winds of Change are Here: Tax Reform and How It Affects you

By IndividualsNo Comments

Over the past few months, there have been several different tax reform bills handed back and forth between the two branches of Congress. A finalized bill has now been confirmed and passed in both the House of Representatives and the Senate.  This bill, called the Tax Cuts and Jobs Act, is an endeavor to reduce tax for all Americans and promote jobs by reducing specific tax rates, adjusting credits, and removing specific deductions.

The Tax Cuts and Jobs Act, a new bill signed by President Trump on December 22, 2017, was passed in order to promote economic growth.  This new bill has changed a variety of different tax rules (which for the most part sunset before 2026) and the following information discusses a few of the substantial changes that will affect a large portion of the population.

Limited Itemized Deductions and Increased Standard Deduction

In recent history, taxpayers have been able to deduct property taxes, vehicle license fees, and state income tax payments on their federal tax return without limit. The new law will reduce this deduction to a maximum of $10,000 combined between state income taxes and property taxes.  Many taxpayers who live in California, New York, New Jersey, and other high tax rate states, will likely feel a tax burden as their deductions are substantially reduced.  In order to offset this change, the new bill increases the standard deduction for joint filers to $24,000, single filers to $12,000, and head of household filers to $18,000.

In addition to limiting the tax deduction, the following expenses will no longer be allowed on the individual tax return as itemized deductions:

  • Miscellaneous Itemized Deductions including:
    • Unreimbursed Employee Expenses
    • Tax Preparation Fees
    • Investment Advisor Fees
    • Estate Planning Fees
  • Personal Casualty Losses (except for losses in federally declared disaster areas)

In addition to the above changes, any new mortgage debt obtained after December 15, 2017 will be subject to a limitation on acquisition indebtedness beginning at $750,000, down from $1,000,000, and the $100,000 home equity indebtedness interest is now disallowed.  Any current mortgage is considered grandfathered and will still be subject to the original $1,000,000 phase-out.

While many of these changes may adversely affect certain taxpayers, there are a few items that will provide a benefit.  In 2017 and 2018, the medical expense AGI limit will be reduced to 7.5%.  It will increase back to 10% beginning in 2019.  Additionally, charitable AGI limits for cash contributions has been increased to 60%, up from 50%.  Lastly, the 3% reduction of itemized deductions for taxpayers above a specific threshold, known as the Pease limitation, has been repealed and will no longer apply from 2018 on.

Passthrough Rates

Taxpayers who run their business through an S corporation or Partnership will potentially see an additional deduction for their income that is passed through to their individual tax return.  The new bill allows for a deduction of 20% of the taxable income reported by the individual related to the income that has been passed out by the business.  There are limits on this deduction, including a complete disallowance for service business owners whose taxable income is over $315,000 for married filing joint and $157,500 for single filers.

Other Notable Changes

In addition to the above changes, the following list of changes will take effect in 2018:

  • Alternative Minimum Tax exemption levels have been increased substantially to $70,300 and $109,400 for single and joint filers, respectively, with the phase-out levels now increased to $500,000 and $1,000,000
  • Personal Exemptions have been repealed
  • Tax bracket rates have been reduced, which includes reducing the highest marginal rate from 39.6% to 37%
  • The Child Tax Credit has been increased to $2,000 per child, with the first $1,400 being a refundable credit
  • Family Credit added to provide up to a $500 credit for individuals who are dependents but are not qualifying children
  • 529 Plans can now be used to pay for grade, private, and high school levels.  Limited to $10,000 per year
  • Recharacterization of IRAs will no longer be allowed
  • Divorce or Separation Agreements executed after December 31, 2018 will result in no deduction for alimony paid, and no requirement to include the alimony income for the receiving spouse

The new tax reform bill provides a variety of changes that may potentially help or harm taxpayers depending on their specific set of circumstances.  If you have questions or concerns on how this new bill will affect you, please feel free to call your L&B professional at (858) 558-9200 and we would be happy to discuss these changes with you.

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