Some people view tax day as a cause for regret. We think that tax day is the perfect day to rethink our goals and to prepare for the future. This is the first year under the Tax Cuts and Jobs Act of 2017 (TCJA) and some of the strategies that we adopted in the past may not be correct for the future. Many of us have developed habits that have long ago ceased to make any sense. For example, at one time we could only pass $600,000 each to our heirs without being subject to the Uniform Estate and Gift Tax. Many people chose to make annual gifts of $10,000 in order to reduce estate and gift taxes. In 2018 the amount exempt from estate and gift taxes was $5.6 million per individual and the annual gift exclusion was $15,000. The majority of people no longer have a need to make annual gifts for the purposes of avoiding estate taxes. Yet, for many people that we meet the annual gift has become a family tradition. This is great if you can afford to make gifts and you want to benefit others, but we should also consider why we do things and whether or not the original purpose still exists. We find this to be true of securities as well. Very often people keep inherited stocks as a type of family heirloom, even though the person who originally bought them had different objectives, different financial conditions, and lived under a different tax regime than his or her heirs.
So, carpe diem, tax season is a perfect time to set up a review for the coming year. We can review charitable giving strategies, whether or not to pay off a mortgage, discuss tax-loss harvesting, contribution levels to retirement plans, or even the establishment of a plan for those who own their own businesses or are planning on selling one. We believe that we should do the cheapest and easiest things first. Yet, these are too often exactly the strategies ignored in favor of complex and expensive schemes. We frequently see clients who have high incomes and who live in high-tax states fail to contribute what they can to their company retirement plans. Way too many people carry high debts that they can’t write off, or fail to think clearly about their charitable contributions.
We are here to help. Please feel free to schedule an appointment if you are meeting with Halley about your taxes. Be advised that this is provided for informational purposes only, should not be construed as tax advice, and is far from a thorough discussion of the intricacies of the tax code. Always consult your tax advisor.