Top 5 TCJA Planning Opportunities for Individuals
Kyrstin W. Mackrides, CPA, MT, and Monica J. DiPaola
Focused on You. Dedicated to Your Success.
October 22, 2018

The Tax Cuts and Jobs Act (TCJA) introduced many deductions and tax credits to help American save money on their income taxes. According to Shaun Hunley, a technical editor with Thomson Reuters Checkpoint, the following are the top five tax planning strategies for individuals in 2018. 

  1. Maximize the qualified business income deduction. Individuals who own interests in a sole proprietorship, partnership, LLC, or S corporation may be able to deduct up to 20% of their qualified business income (Section 199A). Various rules and limitations apply. 
  2. Bunch charitable contributions. TCJA temporarily increases the limit on cash contributions to public charities and certain private foundations from 50% to 60% of adjusted gross income (AGI). You may qualify to claim a charitable tax deduction by bunching (increasing) donations in alternating years (funding year) and scheduling grants over the next two years or other multiyear periods. Plan to take advantage of the deduction when you are at a higher marginal tax rate while actual payouts from the fund can be deferred until later.
  3. Watch out for home equity debt interest. Home equity debt interest is no longer deductible under TCJA. However, according to the IRS, interest paid on home equity loans and lines of credit is deductible if the funds were used to buy or substantially improve the home that secures the loan. It’s treated as home acquisition debt subject to a limit of up to $750,000 (married filing jointly) or $375,000 (married filing separately). 
  4. Revisit your qualified tuition plans. Before TCJA, earnings in a 529 plan could be withdrawn tax-free only when used for qualified higher education at colleges, universities, vocational schools, or other post-secondary schools. 529 plans can now be used to pay for tuition at an elementary or secondary public, private, or religious school (up to $10,000 per year). 
  5. Itemized deductions versus the standard deduction. The standard deduction is doubled under TCJA. For 2018, joint filers can take a standard deduction of $24,000. Although this is good news, TCNJ suspends personal exemption deductions and eliminates or limits many of the itemized deductions. For example, the state and local tax deduction is now capped at $10,000 per year, or $5,000 for a married taxpayer filing separately. TCNJ also temporarily eliminates miscellaneous itemized deductions subject to the 2% floor (tax preparation fees and employee business expenses) and limits the home mortgage interest deduction (see point 3).

Feel free to contact any member of our team at 610-828-1900 (PA) or 732-341-3893 (NJ) with questions. Kyrstin W. Mackrides, CPA, MT, ( ) and Monica J. DiPaola ( ) are managers in our Lafayette Hill and Beachwood offices, respectively. You can also contact me anytime at . We are always happy to help. 
Martin C. McCarthy, CPA, CCIFP
Managing Partner
McCarthy & Company, PC

Disclaimer This alert is for informational purposes only and does not constitute professional advice. Information contained in this communication is not intended or written to be used as tax advice, and cannot be used by the recipient to avoid penalties that may be imposed under the Internal Revenue Code. We strongly advise you to seek professional assistance with respect to your specific issue(s).