1. How to Reduce Current and Future Income Taxes
How the New Tax Law
Affects Your Clients
How to Reduce Current and Future Income Taxes
Alan R. Clopine, CPA, AIF®
CEO & CFO of Pure Financial Advisors, Inc.

2. Tax Cuts and Jobs Act of 2017
The Tax Cuts and Job Act (TCJA) of 2017 was signed into law on December 22, 2017
Most changes began on January 1, 2018
The tax law sunsets on December 31, 2025

3. How the New Tax Rates Changed
Income Tax Rates
How the New Tax Rates Changed
Tax Brackets
2017
2018
Source: waysandmeans.house.gov

4. New Standard Deduction Amounts - 2018
Standard Deductions
New Standard Deduction Amounts
Single: $12,000
Married: $24,000
Head of Household: $18,000
Source: waysandmeans.house.gov

5. Principal Itemized Deduction Changes
Itemized Deductions
Principal Itemized Deduction Changes
State & Property Taxes:
Maximum Deduction: $10,000
Mortgage Interest:
Maximum Loan: $750,000
Home Equity Debt: Non-Deductible (unless used to buy or improve home)
First & Second Homes Qualify
Source: waysandmeans.house.gov

6. Principal Itemized Deduction Changes
Itemized Deductions
Principal Itemized Deduction Changes
Miscellaneous Itemized Deductions: Repealed
Unreimbursed Employee Expenses
Tax Preparation Fees
Investment Fees
Phase-out: Repealed
Source: waysandmeans.house.gov

7. 2018 California Conformity
California Does Not Automatically Conform (without bill approval):
Repeal of Misc. Itemized Deductions
Limit of $10,000 for Property Taxes
529 plans used for K-12 education
California Automatically Conforms to Eliminating Roth Recharacterizations

12. Roth Conversions Roth Conversions and Your Retirement
Increased Benefit for Roth Conversions with Lower Rates
Roth Recharacterizations: Repealed
Be Careful on Your Roth Conversion Amounts Because You Can Not Recharacterize. Do Later in the Year When Income is Known.
Source: waysandmeans.house.gov

13. Tax Triangle
2018 Tax Rates

14. 2018 Tax Brackets - Single Taxable Income Tax Rate Up to $9,525 10%
12%
$38,701 to $82,500
22%
$82,501 to $157,500
24%
$157,501 to $200,000
32%
$200,001 to $500,000
35%
$500,001 or more
37%

15. 2018 Tax Brackets – Married Filing Joint
Taxable Income
Tax Rate
Up to $19,050
10%
$19,051 to $77,400
12%
$77,401 to $165,000
22%
$165,001 to $315,000
24%
$315,001 to $400,000
32%
$400,001 to $600,000
35%
$600,001 or more
37%

16. Section 199A Section 199A Passthrough Entity 20% Deduction
(Proprietorship, LLC, Partnership, S Corp)
Qualifying Business Income
Must be US source (business or rental real estate)
Does not include Investment income (capital gains, interest & dividends)
Lower of 20% of Net Business Income or 20% of Taxable Income
2018 Phase-Out Ranges
Single $157,500-$207,500; Married $315,000-$415,000
Service vs. Non-Service Business

17. Retirement Change Actions Higher Standard Deduction Fewer Will Itemize
How the New Tax Law Affects Retirement
Change
Actions
Higher Standard Deduction
Fewer Will Itemize
Limit on State & Property Tax Deduction
Increased Taxes for Some
Investment Management Fees Non-Deductible
Pay for IRA Management Fees in IRA; Not with Non-Retirement Assets
Source: waysandmeans.house.gov

18. Retirement Change Actions No Changes in Capital Gains
How the New Tax Law Affects Retirement
Change
Actions
No Changes in Capital Gains
Tax Gain & Loss Harvesting Strategies Remain
Alternative Minimum Taxes Remain, BUT
Few Will be Subject to the Tax-Decreased Taxes for Some
Higher Estate Tax Exemptions: $11.2 Million Per Person
Less Need for Advanced Estate Planning & Asset Transfer Strategies
Source: waysandmeans.house.gov

19. Qualified Charitable Distribution
Taxpayer must be over 70 years old
Can donate directly from IRA to charity
Can count as a Required Minimum Distribution (RMD)
Maximum Amount: $100,000
Source: waysandmeans.house.gov

20. Questions?