Changes Coming to a Paycheck Near You - Decoding the Tax Law

By: Chris Hostetler and Kali Whitaker

 

By now, we all know that the tax code has changed significantly starting in 2018, thanks to the Tax Cuts and Jobs Act passed by Congress just before Christmas.

Although there is no shortage of published information about the details of the new code, the dust is only now beginning to settle so that we can understand actual impacts on individual situations. It is going to take some time for planners and accountants to regain fluency in tax planning strategies. As the largest tax overhaul since 1986, this is a monumental change – some might say HUGE.  And it happened very quickly – the act was introduced on Nov 2, 2017 by Representative Kevin Brady of Texas and signed by the President on December 22.

Throughout the year, as we dig into what these changes mean, we hope to share a series of posts on the likely impacts to our clients’ planning and thoughts on some new tax strategies to consider, as well as some old tax strategies that may not make sense any more.  As we absorb the changes, we’ll let you know what we learn and what the impacts might be. 

One important immediate update affects anybody who receives a salary.  You may see a change in your net paycheck between now and February 15, because the IRS has just updated tax withholding rules to account for the new brackets and standard deductions.  For some, this will mean a larger net paycheck, but others may receive a smaller net paycheck.

But remember that the withholding rules provided by the IRS are built for “normal” situations.  They may not estimate your withholding very well if you have any wrinkles in your situation, such as large itemized deductions, less common types of income, many sources of income, etc.  For a helpful FAQ, go here: https://www.irs.gov/newsroom/irs-withholding-tables-frequently-asked-questions.

As we often remind you, we are financial planners, not tax advisors.  We encourage you to discuss your situation with your tax professional.

 

This material is provided as a courtesy and for educational purposes only.  Please consult your investment professional, legal or tax advisor for specific information pertaining to your situation.