Top 3 Ways to Hack the Tax Cuts and Jobs Act

Top 3 Ways to Hack the Tax Cuts and Jobs Act

  1. Update your W-4

Taxpayers can no longer claim a personal exemption.  Make sure you have proper wage withholding.  If you enjoy getting a refund when you file taxes, and you don’t want to owe, you will likely need to update your W-4

  1. Get the medical procedure you’ve been putting off done in 2018

The AGI floor for itemizing medical deductions is now 7.5% instead of the previous 10%.  In other words, if you pay more than 7.5% of your AGI on medical expenses, you will be able to deduct them.

  1. Bunch your charitable contributions

The standard deduction has nearly doubled.  If you are close to being able to itemize deductions, you may want to consider bunching your charitable contributions in one year.

For example, if you normally make charitable contributions of $10,000 per year, you may want to consider making $30,000 in charitable contributions in one year and itemizing deductions, and taking the standard deduction in the next two years.

Remember, many of these provisions are set to expire after 2025.  It is important to stay on top of the tax law changes to make sure you are compliant while also using the tax laws to your favor.

If you have questions about the new tax laws and how they affect you, you should reach out to a tax lawyer who can assist you with your questions and concerns.

Mendes Weed, LLP is here to help you if you have any questions.  (925) 390-3222.

 

The tips and materials provided on this page are for informational purposes only, offered as public service. No information on this website should be considered legal advice or used as a substitute for legal advice. For legal advice, you should contact an attorney directly.

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Christina Weed - Taxation Law Specialist
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Walnut Creek Main Office

1990 N. California BLVd.
Suite 1020
Walnut Creek, CA 94596

(925) 390-3222

San Francisco Office

95 Third Street
2nd Floor
San Francisco, CA 94103

(628) 216-5558

Oakland Office

66 Franklin Street
Suite 300
Oakland, CA 94607

(510) 822-2770

San Jose Office

3031 Tisch Way
110 Plaza West
San Jose, CA 94607

(408) 707-1667

Repeal of State and Local Income Tax (SALT) Deduction

Repeal of State and Local Income Tax (SALT) Deduction

By now, you have probably heard that the 2017 Tax Cuts and Jobs Act has limited the deduction for state and local income tax (SALT) to $10,000 for all tax filers, including tax filers who file their tax returns as married filing jointly.  If you are a California resident, this may be very concerning for you.

The good news is that this change is set to automatically  expire after December 31, 2025.  The bad news is that Californians will be very limited in what they can deduct in terms of state income tax and property tax for the next several years.

California legislators have proposed several bills to hopefully alleviate the challenges that the new federal tax bill has presented.

First, there is AB 1864, the Prosperous Economy and Payer Protection through Equitable Rates Act, or PEPPER, which was introduced by Assembly Member Kiley.  This proposed legislation would have allowed taxpayers to deduct their full federal tax liability on their state tax return.  While this proposed legislation may seem appealing to California residents, it was estimated that it would cost approximately $400 billion.  As of April 9, 2018, this proposed legislation officially failed to pass.

There is also SB 227 introduced by Senator De Leon.  This bill would allow California taxpayers to make charitable contributions to the state to mitigate a new cap on the federal deduction for SALT.  The bill has passed the Senate and will continue to the Assembly.

The Franchise Tax Board’s analysis on this bill indicates that the bill assumes the California Excellence Fund, which taxpayers would contribute to, would be allowed as a charitable contribution deduction on the federal income tax return.

For now, California taxpayers will have to wait and see how this legislation turns out.

If you have any questions about the new tax laws, and what options you have, you should consult with a tax lawyerChristina Weed has an LL.M. in Taxation, and assists clients with their tax law questions.

Mendes Weed, LLP is here to help you if you have any questions.  (925) 390-3222.

 

The tips and materials provided on this page are for informational purposes only, offered as public service. No information on this website should be considered legal advice or used as a substitute for legal advice. For legal advice, you should contact an attorney directly.

SuperLawyers-RisingStars
Best of the East Bay Attorneys
Lisa Janine MendesReviewsout of 5 reviews
Walnut Creek Chanber of Commerce logo
Christina Weed - Taxation Law Specialist
lawyers of distinction badge 2020

Walnut Creek Main Office

1990 N. California BLVd.
Suite 1020
Walnut Creek, CA 94596

(925) 390-3222

San Francisco Office

95 Third Street
2nd Floor
San Francisco, CA 94103

(628) 216-5558

Oakland Office

66 Franklin Street
Suite 300
Oakland, CA 94607

(510) 822-2770

San Jose Office

3031 Tisch Way
110 Plaza West
San Jose, CA 94607

(408) 707-1667

The End of the Spousal Support Silver Lining: The New Tax Laws and What They Mean for Your Spousal Support

The End of the Spousal Support Silver Lining: The New Tax Laws and What They Mean for Your Spousal Support

If you are planning to get a divorce, and you are worried about your spousal support you may want to consider racing to the courthouse.  It is likely that among friendly discussions at the neighbors’ backyard BBQ, you have swapped stories about someone who is paying spousal support and deducting it at the end of the year; however, Trump’s new tax plan will drastically transform the divorce process and the concept of spousal support.

California divorce cases are primarily governed by the California Family Code; however, there are some occasions where federal law applies. Under current federal law, your divorce counsel can construct a Stipulated Judgment or Marital Settlement Agreement which can benefit both parties.  The agreement can be drafted to allow the payee spouse to receive higher support payments, while affording a lower post-tax cost to the payor spouse.  It is somewhat of a win-win.

Spousal support is a heavily weighted, and abundantly negotiated issue in divorce cases, and the taxability issue is a major factor in such negotiations. The new plan arguably creates a lose-lose.  Under the new tax plan, Spousal Support Orders entered into after December 31, 2018 will no longer be tax deductible for the payor.  The payor spouse no longer receives a tax deduction, and the payee receives less money.  Feel free to make your “impact to the economy” arguments here.

If you are contemplating a dissolution, regardless of which side of the spousal support issue you fall on, you may want to hustle, as a delay could seriously impact your bottom line.  It is also important to note that the court system is not as quick as those you may have seen on shows like The Good Wife or Law and Order.  It can often take months to get a court hearing, depending on how impacted your county is.

Plan accordingly, and contact Mendes Weed, LLP for the help you need.

 

The tips and materials provided on this page are for informational purposes only, offered as public service. No information on this website should be considered legal advice or used as a substitute for legal advice. For legal advice, you should contact an attorney directly.

SuperLawyers-RisingStars
Best of the East Bay Attorneys
Lisa Janine MendesReviewsout of 5 reviews
Walnut Creek Chanber of Commerce logo
Christina Weed - Taxation Law Specialist
lawyers of distinction badge 2020

Walnut Creek Main Office

1990 N. California BLVd.
Suite 1020
Walnut Creek, CA 94596

(925) 390-3222

San Francisco Office

95 Third Street
2nd Floor
San Francisco, CA 94103

(628) 216-5558

Oakland Office

66 Franklin Street
Suite 300
Oakland, CA 94607

(510) 822-2770

San Jose Office

3031 Tisch Way
110 Plaza West
San Jose, CA 94607

(408) 707-1667