Jump to main content


5 Questions to Ask Your Tax Advisor

How will the tax law impact your 2018 financial plan?
5 Questions to Ask Your Tax Advisor

When you meet with your tax professional to prepare your 2017 tax returns, it would be a great time to ask how the new Tax Cuts and Jobs Act (TCJA) will affect you personally in 2018, and beyond. It is likely that many taxpayers will see a small decrease in their tax liability, but determining the extent of the tax savings is very complicated. I want to give all of you several questions that you may want to ask your tax professional at your next meeting. I cannot stress enough that impact of the new legislation is very specific to each individual. The questions below are related to personal income taxes and do not reference the changes that pertain to small business owners. If you have questions pertaining to your situation, I encourage you to consult with your tax advisor so that they can help you understand and plan going forward.

1. How will the increased standard deduction affect me?

The Tax Cuts and Jobs Act (TCJA) will double the standard deduction and dramatically reduce the number of taxpayers itemizing deductions on their tax returns. That means many taxpayers will no longer claim a deduction for property taxes, mortgage interest, charitable contributions, etc. It will be important to understand how this change may influence your decisions about paying off your mortgage or giving to charity among other things.

2. I have heard a lot about a $10,000 cap on property and local taxes. How does this affect me?

Arguably, the most contentious part of the TCJA is the cap on state and local taxes. For taxpayers living in states with high state income taxes, this is a very big change because the deductibility of those taxes will be limited. It will also disproportionately affect taxpayers living in areas with high property values. In many of our markets, this change will not have a dramatic impact. But, it is still important to understand how the changes will affect your situation.

3. How can I maximize my charitable giving?

The decision to give to charity is first about giving back, but there are also tax incentives associated with donating to charity. With the doubling of the standard deduction that I mentioned earlier, you will want to ask your tax advisor about strategies to maximize your giving going forward. For those taxpayers who must take required minimum distributions from their retirement accounts, it will likely make sense to make qualified charitable distributions to their favorite charity. The owner of the retirement account will not report the amount distributed to the charity on their income taxes. This will likely be one of the most popular strategies going forward. Donor-advised funds will also likely gain in popularity as well. Donor-advised funds allow taxpayers to lump several years’ worth of giving of into one tax year while allowing them to distribute the funds over time.

4. Will I qualify for the child or qualifying dependent tax credit?

The Tax Cuts and Jobs Act removed personal exemptions from the tax code; however, it dramatically increased the number of taxpayers who will qualify for the child tax credit. It also doubled the amount of the credit from $1,000 per child to $2,000. In 2017, a married couple filing jointly began phasing out of the child tax credit at $110,000, whereas in 2018 the income phase-out threshold has been increased to $400,000. An important point to note is that a credit is a dollar for dollar offset against your tax liability, making it more valuable than the previous personal exemption amount that you could claim for your dependents.

5. How will the increased estate tax exemption affect me?

The amount that a married couple can gift or leave to their heirs that is not subject to Federal estate or gift tax doubled from $11.2MM to $22.4MM in 2018. The number of estates subject to the Federal estate tax is now estimated to be under 5,000 estates per year. It is extremely important to note that the changes to the Federal estate tax have no impact on state estate and gift taxes. In Washington, each taxpayer is currently allowed an exemption of $2,193,000, while in Oregon that figure is only $1,000,000. Many estates will still be subject to state estate taxes, so it remains vitally important to discuss your estate plan with your legal and tax advisors.

About the Author

Brian Bruggeman Headshot

Brian K Bruggeman, CFP®, CTFA

Executive Vice President
Chief Innovation Officer
Director of Financial Planning