Are You Ready For The Tax Cuts And Jobs Act (TCJA)?


Filing 2018 taxes will be the first time many Americans experience the full effects of the Tax Cuts and Jobs Act signed into law in December 2017.  The new law brings a number of changes to deductions applying to individuals for tax years 2018 through 2025.

The standard deductions nearly doubled – $12,000 for single and $24,000 for married filing jointly in 2018.  You may not need to itemize your deductions.

The itemized deduction for state and local taxes (SALT) is now limited to a maximum of $10,000.  This deduction is a combination of property tax, state and local income tax or sales tax.

Acquisition indebtedness on mortgages incurred after December 16, 2017, you can deduct the interest up to $750,000 (previously $1 million.)  Home equity loan interest deductions are suspended unless you use the money to improve the home.

Charitable donations for cash contributions increased to 60% of adjusted gross income, up from 50%.  You must itemize your deductions to claim charitable donations.

For 2018, you can claim medical and dental expenses as itemized deductions that exceed 7.5% of AGI.  In 2019 the floor for medical and dental expenses will be 10% of AGI.

Personal exemptions for 2018 to 2025 have been eliminated.

Beginning 201, the TCJA doubles the child credit to $2,000 per qualifying child under age 17.  Since this is a tax credit which reduces your tax bill dollar for dollar, this is a significant benefit.

Miscellaneous itemized deductions subject to the 2% AGI floor are eliminated.  These include unreimbursed job expenses, investment expenses, and tax preparation fees.

2018 is a tax year that will result in whether or not you get a refund.  The result may be totally different than in the past.  You may need to adjust your W-4 for next year.  Speak to your accountant.

Do You Have a Job or a Career?


hobby or careerMost people have jobs.  They faithfully go to work each morning, do their best to execute their duties, come home tired, and look forward to weekends and vacations.

They do this to make ends meet, hoping something better will come along.  And better things to come now and then, along with setbacks.  But the drudgery continues.  Week in. Week out.  Forty years pass.  Life has been half miserable.  But it’s time for retirement.

Retirement means getting out of job jail.  No more hated work.  It’s now time for relaxation and fun.

Just kidding!

As it turns out, retirement today is this:  After giving up a fairly well-paid full-time job, you take on several poorly paid part-time jobs (without benefits) to pay for your ever-increasing retirement expenses.

But it doesn’t have to be that way.

You can spare yourself the misery by ditching the job early on and replacing it with a career.

What’s the difference?  A career is a life’s vocation.

You work a job to make money.  You work a career to build something you value.

With a job, you are always thinking about the time you won’t be working.  With a career, you are always thinking about it even when you aren’t working.

The reason for this is a matter of focus.  A job looks inward: “I do this to make money for myself.”  A career looks outward:  “I am building  something  that others can appreciate or use.”

The litmus test for determining whether you have a job or a career is this question:  If you could afford to, would you do it for free?

You shouldn’t work for money.  You should work on having a career.

If you don’t like your work but are doing it because you have to support  yourself and/or a family, start working on a Plan B.  Plan B is titled: “Doing Something I Care About.”

Measured in mundane, day-to-day terms, having a career can be challenging since you are constantly focused on the work, and the work sometimes does not go as well as you might want.  But even when the work is frustrating, it involves you in a way that is somehow satisfying.  And when the work goes well, there’s nothing like it.

If you have a job now, can you transform it into a career?  Well, it may depend on what you are doing.

So that is the first and main thing.  But there are requirements for your work to be a career:

  • The work should be challenging. It should require the best of you – your intelligence, your intuition, your stamina, and your care.  Ideally, it should require both knowledge and skill and thus give you the opportunity to learn and improve forever.
  • It should produce things or provide services that are enjoyable and/or useful to other people. This adds a social component to the experience.
  • It should be accretive. That is, the value of the goods or services you produce should increase as your career continues.

Not everyone can make a career out of his or her job.  An architect certainly could.  Instead of designing commercial crap for the highest bidder, she could gradually develop her own style, one that she likes and that would serve people, and she could produce work over her lifetime that would endure for generations.

Think about it.  Start creating your Plan B.  Satisfaction comes from doing something you care about.  And if you can make money for 40 years doing something you care about and creating something that has value to others – you have a career!

New Tax Law Improves 529 Education Savings Plans


One of the most daunting expenses facing many parents is paying for the cost of college or other forms of higher education.  The increase in the cost of college tuition and related expenses has significantly outpaced the broader inflation rate.  529 savings plans are one of the most effective ways to invest money to meet future education expenses.

One factor that makes 529 savings plans attractive is the tax benefits they offer.  Contributions grow tax-deferred.  When money is withdrawn from the account to pay for qualified education expenses, no federal or state taxes are due on earnings that accumulate in the plan.  529 saving plans offer flexibility in terms of the amount of money that can be invested (up to $150,000 for married couples) using advanced gifting that allow a one-time gift with no gift tax implications.

As a 529 account owner, you are always in control of the assets in the account.  This is an important benefit that helps ensure that your investment will be used as you intended.

If the intended beneficiary decides not to pursue higher education or earns a scholarship that makes your contribution unnecessary, you can designate the money for a different purpose.  Some choices are:

  • Changing the beneficiary to another family member of the original beneficiary, without penalty.
  • Using it for your own educational expenses.
  • Leaving the assets in the existing account for future use.
  • Withdrawing the assets.

Keep in mind if assets are withdrawn for a non-qualified educational purpose, earnings on these withdrawals will be subject to applicable federal and state taxes.

The new tax law enacted in December 2017 extends the scope of 529 savings plans to include K-12 private, religious and public tuition expenses.  You can now withdraw up to $10,000 per year tax-free from your 529 savings plan for each beneficiary to help cover tuition costs.

529 savings plans have long been considered a reputable investment vehicle to help pay for educational costs.  They are flexible, allow the account owner to maintain control, and offer unique giving and tax advantages.  If your goals include building up investments to help cover future education costs for your children or grandchildren, consider a 529 savings plan.