Archive for the ‘Legislation’ Category

Last Minute Actions for the New Tax Law

December 20, 2017

As these words are being written, it appears all but certain that we’ll have a new tax law with some rather drastic changes taking effect in 2018. We’ve reviewed the law for issues that may require attention in the last few days of 2017, and came up with the following four items:

Itemized Deduction for State and Local Taxes
Some people will benefit by paying in 2017 tax they would otherwise pay in 2018, but there’s a catch.

Roth Recharacterization Repealed
If you want to undo a Roth conversion you did earlier in 2017, it appears you’ll have to do this before the end of the year.

Loss on IRA Liquidation
In rare circumstances it can make sense to liquidate an IRA when your basis in the IRA exceeds the value of the assets. The opportunity to make this move disappears December 31, 2017.

Alimony Deduction Repealed
If you’re close to completing a divorce settlement agreement, the tax consequences may be more favorable if you close the deal before the end of 2017.

Itemized Deduction for State and Local Taxes

December 20, 2017

This is the first in our series Last Minute Actions for the New Tax Law.

The new tax law will make it harder to benefit from itemized deductions for state and local tax, partly because of an increase in the standard deduction and partly because of a new limit on this particular deduction. Affected taxpayers may want to consider prepaying tax they otherwise would pay in 2018, but the law appears to block this strategy as to prepayments of state and local income tax. (more…)

Roth Recharacterizations Repealed

December 20, 2017

This is the second in our series Last Minute Actions for the New Tax Law.

We’re pleased to say that the strict interpretation of the effective date for this change in the law, which we initially thought was most likely, will not apply. We have confirmed that the IRS will be taking the position that 2017 Roth conversions can be recharacterized until October 15, 2018.

Moving money from a traditional retirement account to a Roth IRA can be a smart move, but sometimes it backfires due to a change in personal circumstances or, more often, investment losses in the converted account. We haven’t had to worry too much about this possibility, though, because we could recharacterize a Roth conversion — in other words, undo it — at any time up until October 15 of the following year. The new law does away with this opportunity. As of 2018, we’re no longer allowed to reverse these transactions. (more…)

Alimony Deduction Repealed

December 20, 2017

This is the fourth in our series Last Minute Actions for the New Tax Law.

But we were wrong! Reading too fast, we thought repeal of the alimony deduction took effect in 2018, but this change in the law is delayed until 2019. Many thanks to the good folks at Kiplinger for alerting us to our error. You have another year to get over all those horrible things your spouse did and reach agreement on a settlement that maximizes overall tax benefits.
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July Law Contains New Tax Compliance Rules

August 22, 2015

Seal of the U.S. CongressJust as highway funds were set to run out, Congress passed a highway bill and President Obama signed it into law July 31, 2015. To pay for the bill without raising tax rates, Congress included some new compliance provisions that will affect some recipients of inherited property, owners of partnership interests, and taxpayers with mortgages.

details: Surface Transportation Act of 2015

Extenders: Baucus Balks

September 23, 2013

Senator Max Baucus of Montana, chairman of the Senate Finance Committee, says he’s had it with extenders. These are tax benefits that have expiration dates but regularly get renewed, usually for a period of just a year or two. Individuals rely on a number of these, such as the itemized deductions for state and local sales tax and private mortgage insurance (PMI). Several of them are important to businesses as well.

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Obama to Propose Retirement Account Cap

April 9, 2013
By Kaye A. Thomas

The Obama administration has revealed that the budget proposal to be published later this week will include a $3 million cap on retirement accounts.

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Tax Rules Extended by ATRA

January 12, 2013

The American Taxpayer Relief Act of 2012 provides “taxpayer relief” primarily by extending tax benefits that were scheduled to expire. Here is a list of the extensions that are of most interest to individual taxpayers. Changes labeled “permanent” can be altered by an Act of Congress but will not expire automatically.
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ATRA Tax Rates for Capital Gain and Dividends

January 12, 2013

The American Taxpayer Relief Act of 2013 (“ATRA”) made important changes in the way long-term capital gain and qualified dividend income are taxed. Here’s an explanation, in Q&A format.

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Qualified Charitable Distribution Transition Rule

January 11, 2013

The American Taxpayer Relief Act of 2012 (ATRA) extends the tax treatment of qualified charitable distributions from IRAs, so that they are available for 2012 and 2013. Because this law wasn’t enacted until January 2013, it includes a special transition rule. You can take advantage of this rule retroactively for 2012, but only if you act before the end of January 2013.

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