Disclaimer: These are the views of Summit Financial Consulting and should not be construed as investment advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy.
What Will The New Tax Law Mean To You?
Happy New Year to you from the staff at Summit! On December 22nd, 2017, the Tax Cuts and Jobs Act was signed into law. Now that the details have been finalized, we can share some details, and also provide an update on our portfolios. Because there were some changes to the estate tax and gifting rules, now may be a good time to review your will or trust. Feel free to call our office to schedule a time to discuss it. We can bring in an estate planning attorney if need be.
Our portfolios that are managed at TD Ameritrade had another great month, and overall, a great year in 2017. Especially on a risk adjusted basis, we’re very pleased with our overall performance. December marked the 13th consecutive month that the majority of our portfolios had gains. Stocks briefly dipped in the first few days of December, which we used as an opportunity. Moving into 2018, we’ll pay particular attention to the potential for infrastructure spending, and may invest in industrials to potentially take advantage. Because this is a mid-term election year, there is always a chance the stock market will slow down during the summer, like 2016 and many previous years. We will be closely monitoring these developments, but we are cautiously optimistic today that the new tax law will provide a tailwind to the economy in 2018.
If you are a client and disagree with any of the moves inside your portfolio, if you would like to update us on your risk tolerance preferences, or if you have had a dramatic change to your income or financial situation, please contact us to discuss it.
Tax Law Update
Before we get started on the details, through our full-service tax preparation firm, Summit Tax Services, we can help you determine how much you can expect to receive in 2018 extra because of the new tax law. Whether you’re working, a business owner, or retired, there are moves you can make now to make sure you take advantage of the new tax law, and plan for a potentially better tax refund or paycheck. To our clients, we are again offering full tax preparation for a basic tax return of only $99. Just call (586) 459-5340 to schedule and receive a personalized tax quote. We’ll be happy to review the past two years tax returns for free to determine if there are any missed opportunities.
The tax law has over 400 pages of details, but below are a few of the biggest changes worth noting. The first major change is the reduction of many tax rates and income brackets:
|Current Law||Tax Cuts and Jobs Act|
|Table 1. Tax Brackets for Ordinary Income Under Current Law and the Tax Cuts and
Jobs Act (2018 Tax Year)
|Married Filing Jointly|
|Current Law||Tax Cuts and Jobs Act|
|Note: The Head of Household filing status is retained, with a separate bracket schedule.|
|Table 2. Tax Brackets for Ordinary Income Under Current Law and the Tax Cuts
and Jobs Act (2018 Tax Year)
Another big change is that the tax law increases the standard deduction to $12,000 for single filers, $18,000 for heads of household, and $24,000 for joint filers in 2018 (compared to $6,500, $9,550, and $13,000 respectively under current law).
However, it eliminates the personal exemption, which does offset some of the other benefits, and it’s sending the state of Michigan legislators into overdrive to preserve a personal exemption at the state level. (Source: http://www.detroitnews.com/story/news/politics/2018/01/11/michigan-exemption-fix-tax-cuts/109343914/)
It retains the charitable contribution deduction, and limits the mortgage interest deduction to the first $750,000 in principal value. It limits the state and local tax deduction to a combined $10,000 for income, sales, and property taxes. Taxes paid or accrued in carrying on a trade or business are not limited. It limits or eliminates a number of other deductions, but expands the child tax credit from $1,000 to $2,000, while increasing the phaseout from $110,000 in current law to $400,000 married couples. The first $1,400 would be refundable if you’re lower income. It also raises the exemption on the alternative minimum tax from $86,200 to $109,400 for married filers, and increases the phaseout threshold to $1 million, which means lower taxes for higher earners.
A sticky situation will need to be resolved in 2018: Healthcare. The tax law effectively repeals the individual mandate penalty, by lowering the penalty amount to $0, effective January 1, 2019. If congress doesn’t act, it will take a difficult health insurance situation and convert it to an extremely dysfunctional health care system.
We’re cautiously optimistic that the new tax law will provide a boost to the economy because of larger paychecks for most people. A boost to the economy is typically good for the stock market. It will likely increase our national debt in the short term, but the hope is that it’s worth it in the long term.
As a reminder, there are two additional services that we provide that can be potentially very helpful to you, your family, and friends.
Summit Health Services
SHS is fully staffed and provides advice on health insurance, business health insurance, dental, vision, and Medicare Supplemental policies. We will shop and quote out the entire market for you to help you determine what will potentially keep the most money in your pocket. Just call (586) 226-2100 to receive a free analysis of your entire health insurance situation. If you or anyone you know works with Aon, especially, please give us a call because there’s a good chance we can save you a lot of money every month.
Lastly, if you or anyone you know has a 401(k) or 403(b) through their current employer, we now provide suggestions on how to invest your 401(k), and more importantly, when to reduce risk. The stock market will drop eventually, and our goal is to help minimize or eliminate the losses in your portfolio by sharing our independent research, and providing timely suggestions on when to move to safety. Most people do not have time to research their options, read economic reports and comb through stock market data. We are happy to provide this service, just give us a call at (586) 226-2100, or click on Risk Score at the top of our website, www.summitfc.net any time.
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Thank you for your confidence and referrals!
The Dow’s record close in 2017 ended with six full weeks of gains- the last time the Dow rose in each of the final six weeks of the year was in 1954. – CNBC.com, December 29, 2017
Roughly $1 billion in gift cards go unused every year. – Marketwatch, December 26, 2017
“Christmas is a time when kids tell Santa what they want and adults pay for it. Deficits are when adults tell the government what they want and their kids pay for it.” – Richard Lamm
Roughly 3.1% of the world’s children live in America, but they own 40% of the toys consumed globally. – University of California
On average, Americans throw away their own body weight in trash every month. – The Washington Post, November 21, 2017
There are more than 500 million visits to Apple retail stores per year, which is roughly equivalent to the population of the European Union. – MarketWatch, December 6, 2017
In the US, 99.7% of all businesses have fewer than 500 employees. Of those, nearly 80%, or more than 23 million, are one-person operations. – The New York Times, November 22, 2017
“Isn’t it funny how day by day nothing changes, but when you look back everything is different.”. – C.S. Lewis
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Summit Financial Consulting LLC is independent and is not an affiliate of Gradient Securities, LLC. Investment advisory
services offered through Summit Financial Consulting LLC, a Registered Investment Advisor in the State of Michigan.