Tax Overhaul Advantages: Act Now or Risk Loss of Deductions and Tax-free Benefits

Know your clientele: Benefits for commuters, deduction losses for movers

The tax law changes executed at the end of 2017 presented taxpayers and financial pros with a huge trove of new deductions and provisions, some of which are well-known and some of which are still being pieced together. Many of these provisions, however, have set expiration dates, and others are likely to be scaled back, meaning now is the time to explore the 2017 Tax Cuts and Jobs Act to see how it can be put to use for your clients.

You can use a number of planning techniques to take advantage of the changes impacting businesses and their owners, say industry veterans David G. Shapiro and Fatima Hasan. In addition to changes to business tax rates and pass-through business income deductions, you can direct clients to account for limits on entertainment expenses, different transaction structuring opportunities, and limits on like-kind exchanges, they say. The pair covers these issues and more in the Eli Financial webinar, “Key Tax Law Changes for Businesses and Business Owners.”

Digital Nomads Wonder What an ‘Abode’ Really Is

Many provisions of the tax overhaul—e.g., new tax brackets, increases in standard deductions, and elimination of itemized deductions— affect broad swaths of the taxpaying populace. But for other, more specific populations, plan details are presenting both challenges and tax savings opportunities.

One such population is the so-called “digital nomad” community—i.e., web-based workers who roam the nation (or the world) working wherever an internet connection presents itself.

For instance, the foreign earned income exclusion under Internal Revenue Code Section 911 allows a U.S. taxpayer to exclude a foreign-earned income ($103,900 in 2018) as long as he/she has a “tax home” in a foreign country and no “abode” in the United States, Accounting Today notes. What that means for digital nomads isn’t yet quite clear. “While a number of cases, including very recent ones, have analyzed the parameters of the ‘tax home’ and ‘abode’ requirements, additional judicial precedent and IRS guidance is still needed,” Accounting Today noted.

For the Wealthy, Now May Be a Good Time to Divorce

Meanwhile, reports The New York Times, taxpayers who finalize or modify their divorces in 2019 or later will no longer be able to deduct alimony. That’s a big deal for the wealthy.

“I have never wanted to counsel people, hurry up and get a divorce,” Fern Frolin, a divorce lawyer at Mirick O’Connell in Boston, told the Times. “I always want to say, ‘Take your time, think if this is the right thing for you.’ But in this particular instance, we could be talking about 15 to 20 years of support, and shifting the tax burden for the last years of a person’s working life.”

Taxes have also changed for commuters and movers, adds MarketWatch. The new law still provides tax-free employer benefits to workers who commute, and employer-provided mass transit passes are still tax-free up to $260 a month. Parking for work gets a similar benefit for now, but job-related moving expense reimbursements are no longer tax-free.

“If your company still pays for transportation fringes, take advantage,” wrote Bill Bischoff for MarketWatch. “If not, I hope you can sign up for a salary-reduction deal that cuts your taxes. The higher your tax bracket, the more you can save. If neither option is available, I feel your pain. The new tax law giveth and it taketh away.”

While guidance from the Internal Revenue Service (IRS) is slim, most tax pros agree on one thing—the benefits seen today may not be here next year, or the numbers may shift to put the benefits out of reach of many taxpayers. Already, Donald Trump has called for another round of tax cuts and more reductions to the corporate rate, The Washington Post reported.

With an uncertain future ahead, say Shapiro and Hasan, don’t leave any possible tax law advantages on the table this year.

To join the conference or see a replay, order a DVD or transcript, or read more

Jeff Schmerker

Jeff has extensive professional experience writing on a variety of topics, from pharmaceutical research to environmental history. He has published more than a half-dozen books, and he has worked as a newspaper reporter, magazine editor and restaurant reviewer. He lives in Missoula, Montana with his wife and son.

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