Broker Check

A Year in Review

| December 28, 2018

 As 2018 winds to a close, it’s a good time for reflection on the past year. 

  • The 2017 Tax Cuts and Jobs Act was officially signed in to law on December 22, 2017. 2018 tax returns will be the first time that we all get to see the effects of these changes.  As a reminder, most itemized deductions have been eliminated and the standard deduction has almost doubled from 2017.  Also, Roth conversions will no longer be able to be recharacterized (reversed), so make sure you and your tax advisor are confident in this decision. 
  • Going forward, for those who, after consultation with their team of professions, wish to do a Roth Conversion, a few tips may be helpful:
  • Make the conversion toward the end of the year when your income tax situation is a little clearer, to decrease the potential need for a do-over.
  • Make the conversion during a dip in market performance to help maximize its value.
  • Look at smaller, partial conversions to manage brackets year-by-year. This may be especially useful for those who are concerned about future tax increases and want to take advantage of the lower rates now, but don’t want to bump into the next bracket in doing so.

On the bright side, there is no more ambiguity over the Back-Door Roth Contribution Strategy, which opens the door to those who earn above the limit for a Roth Contribution to potentially contribute to a non-deductible IRA and subsequently convert that amount to a Roth IRA. 

  • As you start the year looking at goals for the year ahead, if you haven’t made any estate plans for your digital assets, you may want to consider it. Digital assets are becoming more and more important to include in estate planning discussions, as technology intertwines throughout a progressively larger part of our lives.  Digital assets can include: email, social media, blogs, cryptocurrency, photos and videos posted on sites or stored in the “cloud”, reward programs (hotel, airline, etc.), media subscription accounts (iTunes, Spotify, Netflix, newpapers, magazines, etc.), calendar, contacts, text messages, and documents stored on a device’s hard drive.  For those looking for password managers, we suggest looking at LastPass or Dashlane.
  • Finally, after you see the results of the tax changes, discuss any need to change your withholding with your tax advisor. The Internal Revenue Service released an updated Withholding Calculator on the site, as well as a new version of Form W-4 to help taxpayers check and change their 2018 tax withholding. The IRS is suggesting that taxpayers use these tools to make sure they have the right amount of tax withheld from their paychecks.  If changes to withholding should be made, the calculator gives employees the information they need to fill out a new W-4, which they then will submit to their employer.

Content in this material is for general information only and not intended as investment, tax or legal advice. Please consult the appropriate professionals for specific information regarding your individual situation prior to making any financial decision. Traditional IRA account owners should consider the tax ramifications, age and income restrictions in regards to executing a conversion from a Traditional IRA to a Roth IRA. The converted amount is generally subject to income taxation.