Top Five Tax Planning Opportunities for Individuals

Through the tax cuts and jobs act (TCJA)




Payroll.  Tax.  Accounting.  HR Consulting

With tax season fast approaching, here are five opportunities through the Tax Cuts and Jobs Act (TCJA) that individuals should consider for 2018.


No. 5 – Standard Deduction vs Itemized Deduction

Personal exemption has been eliminated with the TCJA, but the good news the standard deduction increased from $6,350 to $12,000 for single filers and $12,700 to $24,000 for joint filers. Unfortunately, the TCJA has limited or taken away other itemized deductions. One of those limited deductions is the state and local tax deduction, which is now limited to $10,000 per year. This new cap will affect married couples who file jointly more than single filers because the cap is per return and not per person. Other changes to itemized deductions are miscellaneous deductions subject to 2 percent floor have been temporarily eliminated. TCJA limits the home mortgage interest deduction to home acquisition debt.

No. 4 – Qualified Tuition Plans

The next opportunity is the qualified tuition plans. Prior to the TCJA any earnings could be taken out tax free when used for qualified education such as colleges, universities or other post-secondary schools. Now, qualified tuition plans can be used for tuition at elementary or secondary public, private and religious schools. This will allow up to $10,000 per year.

No. 3 – Home Equity Debt Interest

Home equity debt interest is no longer deductible. The good news is that interest paid on the home equity loans and line of credits are deductible. That is if these funds are used to buy or improve the home that secures the loans. This is limited to $750,000/$375,00 and is called home acquisition debt. Taxpayers that use the funds to pay off credit cards or personal debt won’t be able to use the interest as a deduction. Tracking how the funds are used is highly recommended.

No. 2 – Charitable Contributions

The limits for charitable cash contributions have temporarily increased from 50 percent to 60 percent of adjusted gross income. Unfortunately, with the changes to the standard deduction and other changes to itemized deductions, some taxpayers will not benefit from this as they will be unable to itemize. A way to help with this is to bunch or increase charitable contributions every other year. Another option would be to set up donor-advised funds. A donor-advised fund is like a charitable investment account, as it is created for the sole purpose of supporting charitable organizations.

No. 1 –Qualified Business Income Deduction

The new qualified business income deduction allows taxpayers who own interest in a sole proprietorship, partnership LLC, or S corporation to deduct up to 20 percent of their qualified business income. Please click here to review the IRS guidelines and rules for this deduction.   

Author:  Jack Lundsten, Kollath CPA