Spotlight on Elderlaw: Making “Cents” of the Tax Cuts and Jobs Act

by Nancy J. Brady, Esq., Partner,

Brady & Marshak, LLP Attorneys at Law

Last month, on Friday, December 22nd, President Trump signed H.R. 1, the “Tax Cuts and Jobs Act” into law.  The following is a brief summary of a few of the changes:

Spouses (who are U.S. citizens) may leave any amount to surviving spouse free of federal or state taxes. On the death of the second spouse, or for unmarried individuals who pass away January 1, 2018 or later, the amount one can leave (to other than a spouse) will double- to $11.2 million.  As always, with tax planning, married couples can leave up to twice the amount to children free of taxes. With the changes in the new law, it is possible, therefore, for married couples who have done tax planning to leave up to $22.4 million free of federal tax consequences.  Keep in mind, many states such as New York, have their own state estate tax, with a more restrictive exclusion amount, which also needs to be considered for estate tax planning.

The new law limits deductions for state and local taxes to $10,000.00. This amount includes both property taxes and state income taxes.  This change to the deduction amount will have a big impact on taxpayers residing in high income and high property tax states, such as here in New York.  Passage of the new law resulted in many considering whether they should prepay 2018 taxes before the end of 2017 to minimize the adverse effects of the change to the deduction.  Due to many restrictions, however, many may not benefit from a prepayment of 2018 taxes.

The new law made changes to the seven income tax brackets, for all categories (individuals; married filing jointly; married filing separately; head of household). You should consult with your accountant, especially if you are still working, in order to make the best of your contributions to your 401k plans, and other retirement plans, to minimize your income taxes.

The standard deduction will increase under the new law-

  • From $6,350.00 (2017) to $12,000.00 (2018) for individuals
  • From $12,700.00 to $24,000.00 for married filing jointly and surviving spouse
  • From $9,350.00 to $18,000.00 for Head of Household

This change will result in fewer taxpayers itemizing their deductions, since more taxpayers’ mortgage interest and charitable contributions will be less than the standard deduction amount.

529 plan distributions under the prior law were limited to post-high school education. With the changes enacted under the new law, distributions from 529 plans can be used to pay tuition and other expenses at elementary, secondary and religious schools.

This is the time of year our 1099s and tax documents are coming in the mail. You should make your appointment with your accountant as soon as you have all 1099s and tax information, so that you can establish a plan for 2018 together with your accountant.

This information is intended for general information purposes, and is not to be interpreted as legal advice. The attorneys at Brady & Marshak, LLP can be reached at 1-718-738-8500.