With its many changes to individual tax rates, brackets and breaks, the Tax Cuts and Jobs Act (TCJA) means taxpayers need to revisit their tax planning strategies. Certain strategies that were once tried-and-true will no longer save or defer tax. But there are some that will hold up for many taxpayers. And they’ll be more effective if you begin implementing them this summer, rather than waiting until year end. Take a look at these three ideas, and contact us to discuss what midyear strategies make sense for you.

1. Look at your bracket

    
   Under the TCJA, the top income tax rate is now 37% (down from 39.6%) for taxpayers with taxable income over $500,000 (single and head-of-household filers) or $600,000 (married couples filing jointly). These thresholds are higher than for the top rate in 2017 ($418,400, $444,550 and $470,700, respectively). So the top rate might be less of a concern.

   However, singles and heads of households in the middle and upper brackets could be pushed into a higher tax bracket much more quickly this year. For example, for 2017 the threshold for the 33% tax bracket was $191,650 for singles and $212,500 for heads of households. For 2018, the rate for this bracket has been reduced slightly to 32% — but the threshold for the bracket is now only $157,500 for both singles and heads of households.
   So a lot more of these filers could find themselves in this bracket. (Fortunately for joint filers, their threshold for this bracket has increased from $233,350 to $315,000.)

   If you expect this year’s income to be near the threshold for a higher bracket, consider strategies for reducing your taxable income and staying out of the next bracket. For example, you could take steps to accelerate deductible expenses.

   But carefully consider the changes the TCJA has made to deductions. For example, you might no longer benefit from itemizing because of the nearly doubled standard deduction and the reduction or elimination of certain itemized deductions. For 2018, the standard deduction is $12,000 for singles, $18,000 for heads of households and $24,000 for joint filers.

 

2. Incur medical expenses

    
   One itemized deduction the TCJA has retained and — temporarily — enhanced is the medical expense deduction. If you expect to benefit from itemizing on your 2018 return, take a look at whether you can accelerate deductible medical expenses into this year.

   You can deduct only expenses that exceed a floor based on your adjusted gross income (AGI). Under the TCJA, the floor has dropped from 10% of AGI to 7.5%. But it’s scheduled to return to 10% for 2019 and beyond.

   Deductible expenses may include:

   • Health insurance premiums,
   • Long-term care insurance premiums,
   • Medical and dental services and prescription drugs, and
   • Mileage driven for health care purposes.

   You may be able to control the timing of some of these expenses so you can bunch them into 2018 and exceed the floor while it’s only 7.5%.

 

3. Review your investments

    
   The TCJA didn’t make changes to the long-term capital gains rate, so the top rate remains at 20%. However, that rate now kicks in before the top ordinary-income tax rate. For 2018, the 20% rate applies to taxpayers with taxable income exceeding $425,800 (singles), $452,400 (heads of households), or $479,000 (joint filers).

   If you’ve realized, or expect to realize, significant capital gains, consider selling some depreciated investments to generate losses you can use to offset those gains. It may be possible to repurchase those investments, so long as you wait at least 31 days to avoid the “wash sale” rule.

   You also may need to plan for the 3.8% net investment income tax (NIIT). It can affect taxpayers with modified AGI (MAGI) over $200,000 for singles and heads of households, $250,000 for joint filers. You may be able to lower your tax liability by reducing your MAGI, reducing net investment income or both.

Each year, St. Louis Small Business Monthly polls its readers to compile a list of the region’s best accounting firms. Wamhoff Accounting is honored to announce that, for the ninth year in a row, the firm has been named to the 2018 list of St. Louis’ Best Accounting Firms.

“We have always been committed to serving our clients, not only at tax time, but all year long,” said Sandy Furuya, president of Wamhoff Accounting Services. “Whether it’s an individual or a small business looking for tax or accounting support, we are here to help. We are honored to have been nominated and chosen as one of the Best Accounting Firms for nine years in a row. We are proud of the service we provide our clients, and look forward to continuing that service so they can meet their goals.”

Wamhoff Accounting not only has made the list of Best Accounting Firms for nine consecutive years now, but has also recently been chosen as one of Small Business Monthly’s Best in Customer Service. The professionals at Wamhoff Accounting have been serving business and individuals since 1975.

Services extend beyond taxes and accounting. Wamhoff Accounting also assists with bookkeeping, financial statements, and establishing new businesses. Free initial consultations are available upon contact, and individual tax returns can be completed within the day.

The Best Accounting Firms in St. Louis were announced in the May, 2018 issue of St. Louis Small Business Monthly.

Wamhoff Accounting Services has once again been named one of the Best in Customer Service for 2018 by St. Louis Small Business Monthly. This is not the first time Wamhoff Accounting has received this award, as they were also on the list for 2017 and several previous years, as well as being named among the Best Accounting firms for a number of years.

St. Louis Small Business Monthly chooses the best companies across multiple industries by polling CEOs, entrepreneurs, and business leaders, to identify the best in each field.  Wamhoff Accounting was part of a select group chosen from the numerous nominations.

“We are honored to be named one of the Best in Customer Service again,” says Sandy Furuya, president of Wamhoff Accounting Services. “We are passionate about helping clients, and we recognize our services go far beyond paperwork. When we help them with accounting, or with starting a business, or any of our services, we are helping them prepare for their future and achieve their dreams.”

To put clients first, Wamhoff Accounting Services offers free initial consultations, and completes individual tax returns within the day. Beyond taxes, Wamhoff Accounting also assists with bookkeeping, and financial statements and establishing new businesses.

In December of 2015, the Federal Reserve hiked interest rates for the first time since 2006. While that hike was modest, many believed it to be the first of many that would take place over the next couple of years. In light of Brexit and weaker than expected jobs reports, that may no longer be the case. Sandy Furuya, Senior Accounting Manager at [Wamhoff Accounting Services] explains.

About Interest Rates and the Fed:

• After the economic crisis of 2008, the Fed adopted a policy of lowering interest rates as a way to help the economy as interest rates have an impact on the stock market, bond markets, inflation and consumer spending.
• We’re currently at near-zero interest.
• In December when the economic outlook appeared more favorable, the Fed made a modest increase in rates. Many anticipated that those increases would continue.
• In fact, any announcements or anticipation of interest rate changes can impact the overall economy.

Interest Rates – Going up or down?

• Many analysts predicted at least two more rate hikes in 2016. The markets were operating in anticipation of these hikes.
• In May, 2016, a weak jobs report, stating that only 38,000 jobs had been added to the economy created uncertainty. On June 23^rd, the UK voted to exit the European Union, sending an impact to US and global markets.
• Economists now believe that the Fed will revert back to a state of “inaction,” neither raising or cutting rates in the foreseeable future.
• Many are pointing to 2018 as being the first possible point at which rates may rise.
• Some are anticipating that the Fed will cut rates again, although since we’re near zero, it will be minimal.

What is the impact of cutting the interest rates to the average investor?

• Lower interest rates can be a good thing in the short term. It’s makes borrowing money to buy things more accessible, which stimulates the economy.
• Mortgage rates are at an all-time low. This makes investing in real estate – residential or commercial – favorable. It’s a good time to buy a new home, a second home, investment property, commercial property, or even refinance to do home improvement project or pay off higher interest debt.
• On the flip side, bank accounts, pension funds and investments don’t grow as quickly as they would in normal economic conditions, which impacts savings and retirement funding.
• Your savings (especially long term savings) must at least keep up with the rate of inflation. The Fed has some control in that changing interest rates can impact inflation, much as it did in the early 80s when inflation was at 14%. They raised interest rates to 20%, which caused a recession but halted the inflation.

2016 was the first year that the IRS made it mandatory for individuals to provide proof that they had health care coverage or they had to apply through the Marketplace for an exemption certificate.  Forms 1095’s were sent out earlier this year which provided the necessary information when you filed your individual tax return indicating that you had health care coverage.  Below is a breakdown of the three different 1095’s that were sent out.

1095-A (Health Insurance Marketplace Statement): This form came form the Market Place. Indicating that you purchased your coverage through the Market Place.  It provided the details on the coverage, who was covered as well as when.

1095-B: (Health Coverage):  Health Insurance Providers (Insurance Companies) sent this form to individuals that they covered as well as when they were covered.

1095-C (Employer Provided Health Insurance Offer and Coverage): Certain employers sent this form to employees, with information about what coverage the employer offered.  Employers that offer health coverage referred to as “self-insurance coverage” sent this form to invididuals that they covered, with information about who was covered and when.

If you purchased your coverage through the Marketplace you might have found yourself owing back money indicating that you didn’t estimate your income correctly.  This was done by completing form 8862 to reconcile advance payments of the premium tax credit that was received.

It is critical if your insurance is purchased through the Marketplace to estimate your income correctly.   To be eligible for the premium tax credit your income level MUST be at least 100% but no more than 400% of the federal poverty level. Below are the amounts that were for 2015.

• $11,670 (100%) up to $46,680 (400%) for one individual
• $15,730 (100%) up to $62,920 (400%) for a family of two
• $23,850 (100%) up to $95,400 (400%) for a family of four

In addition if you have any changes to your household, income or if you move please make sure to notify the Marketplace as these changes affect your coverage.

For six straight years, [Wamhoff Accounting Services] has been named one of the Best Accounting Firms in the St. Louis Area by St. Louis Small Business Monthly (SBM). Each month, SBM polls CEOs, entrepreneurs and business leaders to identify the best companies across multiple industries. With over 200 companies nominated in the category, Wamhoff was, once again, named in the top three.

“This is our 40th year in business, and our continued presence at the top of ‘best-of’ lists is a testament to our team’s excellence in staying true to our value,” says Robert Wamhoff, president of Wamhoff. “Very simply, at Wamhoff, we help our clients with finances – but we recognize that finances are more than dollars. Finances represent hope for the future and comething beyond current circumstances. Our team is resolute in standing with our clients to vision how finances can be a part of their vision.”

To achieve this deep level of commitment to clients, Wamhoff’s accounting services go beyond helping with taxes, bookkeeping, and financial statements. Wamhoff’s team of accountants also assists with establishing new businesses.

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The Best Accounting Firms in St. Louis were announces in the May, 2015 issue of St. Louis Small Business Monthly. The top three were honored at an awards luncheon on October 20, 2015.