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Tax season is here, once again! I anticipate that this season will be different than tax years of the recent past due to the Tax Cuts and Jobs Act (“TCJA”). While a lot has changed, there are a few things about tax season that never change – mistakes.

Unless you’ve been hiding under a rock, you’ve probably heard about the battle between the President and Congress over funding for a southern border wall. The government “shutdown” created by the impasse has created a lot of uncertainty about many government-provided services.

Historically, in the U.S., only goods were subject to sales tax. But as the economy has shifted from a production to a service-based economy (beginning in the 1950s), some services became subject to sales tax. 

Current Law:

The Tax Cuts and Jobs Act of 2017 limits individual taxpayer's state and local tax (SALT), itemized deduction to $10,000 (including real estate taxes). The previous law allowed an unlimited deduction. This change may be detrimental to many individual taxpayers who relied heavily on these deductions in the past.

State Work-Arounds:

Some states have considered "work-arounds" to combat this limitation. Select states (California, Connecticut, Illinois, New York and New Jersey, thus far) have created state

Every year at this time, you start to hear more about the importance of year-end income tax planning in radio and television commentary. For many people with more complex businesses or investments, the beginning of the 4^th quarter of the year signals the time to start to organize their tax documents and to set-up an appointment with their advisors to review results.

This year is different! This year, tax planning should be important to everyone, not just for those that have complex tax situations. The implementation of the Tax Cuts and Jobs Act of 2017 has impacted every taxpayer. While we have all heard about it, not everyone has an applied working knowledge of what the impact will be in the first annual income tax filing season, which begins in about three months.

For many individuals, September means it is time to look for a new car since the upcoming year’s automobile models are introduced.

On June 21, the Supreme Court handed down a landmark decision in South Dakota vs. Wayfair (“Wayfair”).   The fallout of this decision will significantly change the way online vendors handle sales and use (“S&U”) tax for out-of-state consumers going forward.  It will, therefore, also affect online consumers.  Are you impacted!?

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 credit card debt, etc.

The good news is that the IRS has announced “Interest on Home Equity Loans Often Still Deductible Under New Law.”

A proposed bill has the potential to put taxpayers in a charitable mode.

U.S. Rep. Chris Smith (R-NJ) and U.S. Rep. Henry Cuellar (D-TX) recently introduced the “Charitable Giving Tax Deduction Act,’ a bipartisan bill that would make charitable tax deductions “above-the-line,” allowing taxpayers to write off charitable donations without limitation, whether or not they choose to itemize.

The proposed bill would address concerns that changes made by the Tax Cuts and Jobs Act will result in fewer taxpayers itemizing their deductions, reducing the tax incentive to make charitable contributions. 

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 adjusted gross income, so they may have benefits elsewhere on a tax return. While the spouse or former spouse paying the alimony gets a tax deduction, the recipient reports alimony as taxable income.

Shifting into reverse

Beginning with agreements executed in 2019, there will be no tax deduction for alimony. As an offset, alimony recipients will not include the payments in income.