Wealth Management Group Newsletter – Spring 2018
Dan Newman, Adam M. Levine

What’s in the new tax law for you?


You have likely already heard a lot about the Tax Cuts and Jobs Act (TCJA), which became law in late December. However, behind all the sound and fury, do you understand how the new tax law actually affects you?

In general, the TCJA attempts to simplify tax filing by reducing certain itemized deductions and increasing the standard deduction. So, if you have itemized deductions in the past, you may want to take a different approach to minimizing your tax liability for 2018. The following summarizes major tax law changes that affect individuals. But, be sure to consult with your tax advisor to learn how these rules apply to your specific situation.

Rate adjustments

The new law sticks with seven income tax brackets, but adjusts the tax rates from 2017 rates of 10%, 15%, 25%, 28%, 33%, 35% and 39.6% to 10%, 12%, 22%, 24%, 32%, 35% and 37%, respectively. For 2018, the highest rate will apply when taxable income exceeds $500,000 for single filers and $600,000 for joint filers. These adjusted rates apply through 2025, at which time they will return to the prior-law rates — absent further congressional action.

Long-term capital gains rates have not changed and remain at 0%, 15% and 20%, with a few exceptions. These rates also apply to qualified dividends.

Exemption and deduction changes

In 2017, most taxpayers were able to claim a personal exemption of $4,050 each for themselves, their spouses and any dependents. The TCJA eliminates that exemption for 2018–2025, but offers family tax credits to help make up for the elimination. (See Sidebar “Tax Credits for Children and Other Dependents.”)

As for the standard deduction, the new law almost doubles it to $12,000 for single filers and $24,000 for joint filers for 2018–2025. These amounts will be adjusted for inflation beginning in 2019. Here’s how the law affects other deductions:

  • State and Local Taxes (SALT)
    The deduction for state and local taxes (SALT) is preserved, but restricted. The TCJA limits it to no more than $10,000 for the total of state and local property taxes and income or sales taxes, for 2018–2025.
  • Mortgage Interest
    This deduction also survives in a limited form. Taxpayers can deduct interest only on mortgage debt of up to $750,000 for 2018–2025 ($1 million for mortgage debt incurred before December 15, 2017). However, deductions for interest on home equity debt are generally prohibited for 2018–2025, regardless of when the debt was incurred. There may be exceptions depending on how the debt is used.
  • Medical Expenses
    For 2017 and 2018, the medical expense deduction is expanded. The threshold for deducting such unreimbursed expenses is reduced from 10% of adjusted gross income to 7.5%.
  • Moving Expenses
    The moving expense deduction is generally suspended for 2018–2025. Employer-provided qualified moving expense reimbursements generally can no longer be excluded from gross income and wages.
  • Casualty and Theft Losses
    The deduction remains, but for 2018–2025 it is allowed only for casualty losses that have been caused by an event the President officially declares a disaster.
  • Alimony Payments
    The TCJA removes the deduction for alimony payments, while also excluding the payments from a recipient’s taxable income, for agreements reached or amended after 2018.
  • Miscellaneous
    Itemized deductions for expenses such as investment expenses, certain professional fees and unreimbursed employee business expenses have been eliminated for 2018–2025.

AMT and estate tax alterations

The TCJA keeps both the alternative minimum tax (AMT) and the estate tax, but it substantially narrows the number of taxpayers affected by them for 2018–2025. For the AMT, the law temporarily increases the exemption amount to $109,400 for married couples (50% of that amount, or $54,700, for married individuals filing separately) and $70,300 for all other taxpayers (except estates and trusts). It also increases phaseout thresholds ($1 million for married couples and $500,000 for all other taxpayers except estates and trusts). These amounts will be adjusted for inflation.

The estate tax exemption is doubled to an inflation-adjusted $10 million (thus, $11.18 million for 2018).

Taking control

With 2018 already well underway, it is important to get up to speed on the TCJA. Once you know how the law affects you, you will be better equipped to make tax minimization plans.

Sidebar: Tax credits for children and other dependents

For 2018–2025, the Tax Cuts and Jobs Act (TCJA) increases the child credit from $1,000 to $2,000 per child under age 17. The amount of $1,400 per child is refundable should the credit exceed actual tax liability.

The TCJA also extends the credit to more families by raising phaseout thresholds to $400,000 adjusted gross income for married couples and $200,000 for all other filers. Note, however, that the credit will lose value over time because the thresholds will not be adjusted for inflation.

The tax law also adds a temporary $500 nonrefundable credit for qualifying dependents other than children eligible for the child credit. For more information about how the TCJA affects dependents, talk to your tax advisor.

For more information, contact Dan Newman at [email protected] or 312.670.7444. Visit ORBA.com to learn more about our Wealth Management Services.

Natural Disasters: To Protect Yourself, Prepare for the Worst


Natural disasters took a massive toll on North America in 2017. In addition to loss of life, hurricanes Harvey, Irma and Maria, various California wildfires and earthquakes in Mexico resulted in total economic losses of $330 billion, according to Munich Re. This represents the second most financially catastrophic year attributed to natural disasters around the globe.

If you have been lucky enough to dodge a direct hit by a natural disaster, you could still be affected. To reduce risk, some insurance companies have tightened their coverage guidelines in certain regions and raised the cost of premiums. The following items below will teach you how you can better protect your property and reduce potential losses in the event of future disaster.

Working with insurance providers

To help ensure that your insurance company will be able to pay any disaster-related claims, check its financial stability. In general, you should do business only with insurers with high credit ratings. These companies are more likely to survive short-term financial difficulties caused by a surge in claims following a major disaster. Also, check with your state insurance office to find out which companies have track records of paying claims on time.

Of course, even a highly-rated insurance provider will not adequately cover your losses if you have not purchased sufficient coverage. If your home has appreciated significantly in recent years, you may no longer have enough protection. Your insurance agent can help you figure out how much coverage you truly need, given current property values or recent major purchases. Policy riders can provide extra protection for high-value items such as jewelry, art and antique furniture.

Keeping your coverage is another concern. Filing claims for relatively small amounts of damage may save you money in the short term. However, do it too often and you may risk losing your homeowners insurance. In most cases, you are better off paying for modest repairs yourself and saving insurance claims for larger, costly repairs. To save money on premiums, consider raising your deductible to the maximum you would be willing to spend out of your own pocket.

Taking proactive measures

Following a disaster, it can be challenging to answer all of your insurers’ questions about what you owned and want to replace. Save yourself time now by making a list of your important possessions, including key information, such as purchase dates and serial numbers. Take photos or video footage of every room in your house, making sure that particularly costly possessions are recorded.

If you live in an especially disaster-prone area, you should have liquid assets safe and readily available. Most experts recommend a cash fund of at least three months’ worth of emergency expenses.

Recognizing the possibility

No one likes to imagine the worst. But, when the worst happens, at least you know that you are protected.

For more information, contact Adam Levine at [email protected] or 312.670.7444. Visit ORBA.com to learn more about our Wealth Management Services.

Forward Thinking