From the desk of W. Bailey Smith:
What should you do before January 1, 2019 to make the most from President Trump’s new tax law?
Based on your last year’s deductions, should you itemize your deductions or should you take the new higher standard deduction of $24,000.00 per couple?
The best way to answer this question is to determine your deductions from last year for mortgage interest, state income taxes, real estate taxes, charitable deductions, and personal property taxes. If they add up to more than $24,000.00, you should itemize rather than taking the standard $24,000.00 deduction.
Remember existing mortgages are grandfathered in at $1 million in debt, but after December 2017, new mortgages are limited to $750,000.00 in debt. You can only deduct home equity interest to buy, build, or improve your home but you cannot deduct it to pay off consumer debt or student loans.
In the past approximately 70% claimed the standard deduction, but with the new law, accountants are expecting about 90% to take the $24,000.00 deduction.
Convert your traditional IRA to a Roth IRA. Although you have to pay taxes now, the advantage would be later in retirement, you can pull out the Roth IRA tax-free.
Sell the losers in your taxable accounts today to offset the winners this year. Get rid of the losers.
If you have more than $3,000.00 in losses, then carry the loss over into the future years.
Use the gift tax exclusion of $15,000.00/$30,000.00 to everyone and make gifts free of both the gift and death tax now.
Bust the A-B trust to avoid income taxes for your children on their inheritance and to make it easier for the surviving spouse. Your surviving spouse will not be happy with the complexity of having to file 4 income tax returns and give detailed accountings of how she’s spending the money for the benefit of the children.
Seniors with IRAs can continue deducting gifts to their favorite charity and also take the new standard deduction of $24,000.00 “if” they make their charitable donation directly from their IRA. This opportunity only applies to those seniors over 70 ½ years old and the maximum allowed is limited to $100,000.00.