CAREFREE – As the end of 2018 approaches, Jim Hundman of Hundman Law asks, “Is your estate planning up to date?” Remember, best to review estate plans every three to five years as it’s important to check titling of assets to assure they are consistent with your estate plan. As always, Hundman can help!
Also, expect some tax changes. Here’s what to know:
Limit on overall itemized deductions suspended.
The income-based phase-out of certain itemized deductions does not apply in 2018. This means that some taxpayers may be able to deduct more of their total itemized deductions if their deductions were limited in the past because their income was above certain levels.
Deduction for state and local income, sales and property taxes modified.
A taxpayer’s deduction for state and local income, sales and property taxes is limited to a combined, total deduction. The limit is $10,000 – $5,000 if married filing separately. Anything above this amount is not deductible.
New dollar limit on total qualified residence loan balance.
The date a taxpayer took out his mortgage/home equity loan may also impact the amount of interest he can deduct. If a taxpayer’s loan was originated or was treated as originating on or before Dec. 15, 2017, he may deduct interest on up to $1 million in qualifying debt, or $500,000 for taxpayers who are married filing separately, If the loan originated after that date, the taxpayer may only deduct interest on up to $750,000 in qualifying debt, or $375,000 for taxpayers who are married filing separately. Limits apply to combined amount of loans used to buy, build or substantially improve taxpayer’s main home and second home.
Deduction for home equity interest modified.
Interest paid on most home equity loans is not deductible unless the interest is paid on loan proceeds used to buy, build or substantially improve a main home or second home.
For example, interest on a home equity loan used to build an addition to an existing home is typically deductible, while interest on the same loan used to pay personal living expenses, such as credit card debts, is not.
As under prior law, the loan must be secured by taxpayer’s main home or second home (known as a qualified residence), not exceed cost of home and meet other requirements.
Limit for charitable contributions modified.
The limit on the deduction for charitable contributions of cash has increased from 50 to 60 percent of taxpayer’s adjusted gross income. This means that some taxpayers who make large donations to charity may be able to deduct more of what they give this year.
Deduction for casualty/theft losses modified.
A taxpayer’s net personal casualty and theft losses must now be attributable to a federally- declared disaster to be deductible.
Miscellaneous itemized deductions suspended.
Previously, when taxpayers itemized, they could deduct the amount of their miscellaneous itemized deductions that exceeded two percent of their adjusted gross income. These expenses are no longer deductible.
This includes unreimbursed employee expenses – uniforms, union dues, deduction for business-related meals, entertainment, travel. It also includes deductions for tax preparation fees and investment expenses – investment management fees, safe deposit box fees, investment expenses from pass-through entities.
Phone James E. Hundman at 480-625-3134 for taxes, estate planning (wills, trusts, powers of attorney) and/or wealth management. Office: 36600 N. Pima Rd.