As we enter a new year, it’s time
to start thinking about smart tax moves to help minimize what you’ll owe Uncle
Sam on April 15, 2020. Given the fact that the 2017 Tax Cuts and Jobs Act went
into effect only last year, taxpayers are still learning the ins, outs and potential
undiscovered advantages of the plan. For example, if you did not itemize
deductions on your previous federal return, your state tax refund will be
tax-free.1

Bear in mind that other
clarifications have come to light since the law was passed, such as deducting
interest on a home equity line of credit. However, if you actually used the money
from a home equity loan to repair or renovate your home, the interest on that
loan is still deductible.2

We recognize that tax planning is
an onerous task, made more difficult by changes in tax law. If you are
wondering how any changes in your investment portfolio may affect your taxes,
please give us a call. If we don’t have the exact tax expertise you need, we
can help point you in the direction of someone who does.

In addition to doubling the
standard deduction, the Tax Cuts and Jobs Act reduced individual income tax
rates to between 12% and 37%. However, these cuts are scheduled to expire in
2026. In recent months, the Trump administration has proposed dropping the
marginal rate even lower for the current 22% income tax bracket, down to 15%.
While this appears to be a strong carrot entering the 2020 campaign year,
there’s been no clarification as to how this tax cut would be paid for and,
given that it would add roughly another trillion dollars or so to the federal
debt throughout the next decade, is not likely to gain traction in Congress.3

If you traditionally deducted
substantial mortgage interest as well as state and local real estate and income
taxes, you may have seen a noticeable difference in last year’s return. The Tax
Cuts and Jobs Act capped these federal deductions at $10,000, which some real
estate analysts say is responsible for lower home valuations in some parts of
the country.4

It’s also important to stay
abreast of the tax-related ins and outs of inherited IRAs. If you are the deceased
account owner’s spousal beneficiary, you have several options — one being that you
can basically treat the account as your own. However, if you’re a non-spouse
beneficiary, your options are limited. Currently, you can either take
distributions based on your own life expectancy — the “stretch option” — which
allows the funds to continue growing tax-deferred in the account; or, you must
liquidate the account within five years of the original owner’s death. Note
that as of 2019, Congress is currently considering legislation that would
eliminate the stretch option and require full liquidation within 10 years of
the account owner’s death.5

Content prepared by Kara Stefan
Communications.

1 Rocky Mengle and Kevin McCormally. Kiplinger. Dec. 2,
2019. “20 Most-Overlooked Tax Breaks and Deductions.” https://www.kiplinger.com/slideshow/taxes/T054-S001-most-overlooked-tax-deductions-breaks-2019/index.html. Accessed Dec. 5, 2019.

2 Andrew H. Friedman. Merrill Lynch. March 19, 2019. “Tax
Law Update: New Information on What’s Deductible – and What’s Not.” https://www.ml.com/bulletin/tax-update-the-irs-answers-frequently-asked-questions.recent.html. Accessed Dec. 5, 2019.

3 Knowledge@Wharton. Nov. 19, 2019. “A Middle-class Tax
Cut: Weighing the Costs and Benefits.” https://knowledge.wharton.upenn.edu/article/blouin-middle-class-tax-cut/. Accessed Dec. 5, 2019.

4 Knowledge@Wharton. Oct. 22, 2019. “Why Tax Changes
Are Hurting the Housing Market.” https://knowledge.wharton.upenn.edu/article/tax-changes-hurting-housing-market/. Accessed Dec. 5, 2019.

5 James Royal. Bankrate. Nov. 19, 2019. “7 inherited
IRA rules all beneficiaries must know.” https://www.bankrate.com/retirement/inherited-ira-rules/. Accessed Dec. 5, 2019.

We are an independent firm helping individuals create
retirement strategies using a variety of insurance and investment products to
custom suit their needs and objectives. This material is intended to provide
general information to help you understand basic financial planning strategies
and should not be construed as financial or investment advice. All investments
are subject to risk including the potential loss of principal. No investment
strategy can guarantee a profit or protect against loss in periods of declining
values.

The information contained in this material is believed to be
reliable, but accuracy and completeness cannot be guaranteed; it is not
intended to be used as the sole basis for financial decisions. If you are
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