Home Equity Loans May Still Be Deductible

The Tax Cuts and Jobs Act of 2017 affected the tax deduction for interest paid on home equity debt as of 2018. Under prior law, you could deduct interest on up to $100,000 of home equity debt, no matter how you used the money. The old rule is scheduled to return in 2026. The bad news is that you now cannot deduct interest on home equity loans or home equity lines of credit if you use the money for college bills, medical expenses, paying down…

Many Business Expenses Are No Longer Deductible

The good news is that the TCJA of 2017 lowered corporate tax rates from a graduated schedule that reached 35% to a 21% flat rate. The bad news? Many business expenses are no longer tax deductible. That list includes all outlays that might be considered entertainment or recreation. As of 2018, tickets to sports events can’t be deducted, even if you walk away from the game with a new client or a lucrative contract. The same is true if you treat a prospect to seats…

Bond Funds Are Not Riskless – Holdings Diversity is Key

Typically, bond funds with low yields have relatively low risk (see the CPA Client Bulletin, March 2018). That doesn’t mean that these funds are riskless, though. With interest rates expected to rise this year, all types of bond values could drop, leading to an overall pullback in the prices of bond fund shares. One way to respond to this unwelcome outlook is to diversify your fixed-income holdings. Example: Jane Miller has a target asset allocation of 60% in stocks and 40% in bonds. Working with…

Future Divorce Tactics Impacted by Tax Reform

When couples divorce, financial negotiations often involve alimony. The tax rules regarding alimony were dramatically changed by the Tax Cuts and Jobs Act (TCJA) of 2017, but existing agreements have been grandfathered. In addition, the old rules remain in effect for divorce and separation agreements executed during 2018. Next year, the rules will change, and the roles will be reversed. Under divorce or separation agreements executed in 2018, and for many years in the past, alimony payments have been tax deductible. Moreover, these deductions reduce…

Do you know your true tax rate?

It has been widely reported that the TCJA lowers federal income tax rates for many people. The highest tax rate, for example, has fallen from 39.6% to 37%. Many people who are in lower brackets also stand to benefit. Example 1: Alice Young had $100,000 of taxable income in 2017. As a single filer, Alice was in the 28% tax bracket. If Alice has that same $100,000 in taxable income in 2018, she will be in a 24% bracket. Indeed, Alice could add as much…