Weekly Access

On That Tax Season Grind

By Michael McKeown, CFA, CPA - Chief Investment Officer

Our tax friends at Skoda Minotti are on the grind this time of year.  Late nights and weekends come with the territory, but there is an even bigger reason why this year.  The Tax Cuts and Jobs Act of 2017 brought both more questions and more opportunities as people file taxes for the first time under the new laws.

Tax rates dropped across brackets, which was great.  What also changed was withholding taxes on paychecks.  Many people are noticing smaller refunds or even owing federal taxes for the first time.  I learned from this blog by Carly Roberts that the IRS knows withholding taxes were light this year.  The IRS is offering payment plans and even waiving penalties for those who paid at least 85% of taxes through withholding.

The favorable treatment will not be the same next year, so be sure your withholding is where you want it to be with the IRS Withholding Calculator.

In addition, many readers may have a rental property.  Thanks to the new tax laws, there is a safe harbor for the Qualified Business Income Deduction, detailed here by Eleanore Waszak.  This attempts to put partnerships and non-corporations in line with the very low corporation income tax rates which fell to 21% in the top bracket.

We wrote about Qualified Opportunity Zones (QOZ), which was part of the Investing in Opportunity Act, passed in December 2017.  We are awaiting the final guidance from Treasury on more details about the QOZs and how to properly comply.

One area worth highlighting is for entities that realized a capital gain in 2018 and in the future.  An entity has 180 days from after the tax year end to invest in a QOZ Fund.  This has three benefits: 1) Delaying capital gains tax payment for 7 years until 2026.  2) Reducing taxes by up to 15%.  3) The Big One – No capital gains taxes on the QOZ fund if held for 10 years or more.

Between lower marginal tax rates, a reduction in State and Local Taxes deductions, and so much more, there is a lot to keep track of for filing taxes this year.  The IRS website has some great resources and Aurum is happy to where possible.


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