4 Things to Keep in Mind in 2018’s Changed Tax Environment

With the passing of the Tax Cuts and Jobs Act, 2018 begins a newly altered tax environment. Some changes will benefit corporate and individual taxpayers so it’s critical to have a clear understanding of what these new tax situations are to help drive effective strategies for clients.

Below are four considerations to keep in mind for your clients in this new tax era:

1. Consider holding off on any transactions that may trigger the alternative minimum tax (AMT)

For example, when exercising incentive stock options. The AMT is narrowed under the new tax law, with an estimated 200,000 households now being impacted by this tax versus the more than 10.3 million households in 2015. Since the new regulations raise the exemption and phase out levels from 2018 through 2025, it will be beneficial for your clients to make certain transactions once the AMT no longer applies to them.

2. Be aware of the new standard deduction amounts

With the increase of the standard deduction to $12,000 for single filers and $24,000 for joint filers, itemizing will no longer be an effective strategy for minimizing taxes for many of your clients. 2017 may be the last ideal year to itemize since most deductions are repealed going forward. For the 2018 tax year and beyond, you may have to come up with different strategies and consult your clients accordingly.

3. Changes with Affordable Care Act, from 2017 to 2018

While the health insurance mandate was repealed, it only eliminates the penalty for failing to carry health insurance starting in 2019. As a result, your clients will still need to show they met health care requirements on their 2017 and 2018 tax returns. It is also a good idea to discuss financial planning with your clients for proper healthcare financial management solutions in 2018, like an HSA.

4. Be aware of filing extensions if qualifying for disaster relief

This applies to clients affected by a hurricane, wildfire, or flood this summer or fall. The IRS outlines each group who will benefit from IRS disaster relief on their site here. It is very important to note that January 31, 2018 is the new deadline for filing most returns that have an original or extended due date that occurs before January 31. This includes tax-filing extensions that were due on September 15 and October 16, quarterly payroll and excise tax returns that were due on October 31, and more.

As tax professionals, we will continue to navigate the new tax environment each year but the sooner you’re educated on effective tax strategies, the better you can serve your clients.

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@canopytax

Kurt Avarell, a former Wall Street tax attorney, founded Canopy to transform the entire experience of paying and resolving taxes for tax professionals and their clients. The cloud-based solution minimizes paperwork, streamlines tax resolution, and enables unmatched practice management. Kurt is a licensed attorney in the state of New York and holds a law degree and a Master’s degree in Accounting from Brigham Young University. https://www.linkedin.com/in/kurtavarell/