As the end of the year approaches, it is a good time to think of planning moves that will help lower your tax bill for this year and possibly the next. Year-end planning for 2019 takes place against the backdrop of the landmark Tax Cuts and Jobs Act (TCJA) changes that many individuals and businesses still haven’t fully absorbed.

The TCJA, enacted in December 2017, made substantial changes to the prior Federal Income Tax Code. There have not been major changes to the TCJA during 2019, although there has been some clarification provided by Treasury Regulations and other official notices. Take another look at the provisions of the TCJA and some recent changes to the prior tax code that were not altered by the TCJA in case there are any planning points that should be considered before the close of this tax year.

A change in the national administration in the 2020 elections could have a substantial effect on the following information in upcoming years; our purpose today is to discuss what is in effect now and in the immediate future. Refer to the links below for more details.

For individuals, these changes (approved by Congress at the end of 2017 to start in 2018, currently set to continue to the end of 2025) include the following:

  • lower income tax rates,
  • a boosted standard deduction,
  • severely limited itemized deductions,
  • no personal exemptions,
  • an increased child tax credit,
  • and a watered-down alternative minimum tax (AMT).

These are some of the changes under the TCJA (again, currently set to continue through the end of 2025) generally affecting businesses:

  • the corporate tax rate has been reduced to 21%,
  • there is no corporate AMT,
  • there are limits on business interest deductions,
  • there are very generous expensing and depreciation rules,
  • and non-corporate taxpayers with qualified business income from pass-through entities may be entitled to a special 20% deduction.

Despite these major changes, the time-tested approach of deferring income and accelerating deductions to minimize taxes still works for many taxpayers, along with the tactic of bunching expenses into this year or the next to get around deduction restrictions.

As always, however, year-end tax planning doesn’t occur in a vacuum. It must take into account each taxpayer’s particular situation and planning goals, with the aim of minimizing taxes to the greatest extent possible. We can narrow down the specific actions that you can take, once we meet with you, to tailor a particular plan. In the meantime, please review the documents at the links below and contact us at your earliest convenience so that we can advise you on which tax-saving moves to make.

Year-End Tax Planning Moves For Individuals

Year-End Tax Planning Moves For Businesses & Business Owners

Thompson Reuters