Woodstock Quarterly Newsletter / Winter 2018
Over the next few months, analyses of the new tax law, the Tax Cuts and Jobs Act of 2017 which is generally effective starting January 1, 2018 will be forthcoming. Most of the tax return preparation for the year 2017 will be under the old law and planning for 2018 and beyond will be under the new law, a dual mandate for tax departments this year.
Generally there are reduced income tax rates, and thereby tax due, for almost all taxpayers. There are initial indications that certain tax benefited plans such as 529 plans and health savings accounts may have enhanced future usefulness. Also, the higher thresholds for the Alternative Minimum Tax (“AMT”) mean that many taxpayers who had to add back deductions for state and local taxes to determine their tax due may not have to pay the AMT, but the new law “caps” those deductions so the end result may be a small change for those taxpayers.
There are substantial changes to estate and generation skipping tax (“GST”) rules with implications for the gift tax. The planning opportunities have opened very wide, especially in a state like Massachusetts which does not have a gift tax but does have a rather low threshold for the estate tax. From wondering in 2012 whether the federal estate and GST thresholds would drop to $1 million or be compromised at something higher (the compromise was $3.5 million) to now be at $11.2 million per individual is dramatic change in a relatively short period of time. Elections have consequences, so 2018 should be a time for planning and change. While the tax free gift per individual per donee of $15,000 per year (inflation adjusted from $14,000 from 2013-2017) seems less important now, one of its chief benefits was that it could be structured to generate no paperwork. We will still have elections and the tried and true methods used for intergenerational planning should still have a place even within these dramatic changes.
If you or any of your other advisors have questions about the issues raised here, please contact your investment manager or one of us.
William H. Darling, CPA – Chairman & President
Jeanne M. FitzGerald, CPA – Tax Manager