Tax season is upon us! This year may prove especially challenging for Americans given the new tax codes and the government shutdown, meaning fewer IRS personnel are available to clarify any confusion on the laws.
While we are not tax experts, we have taken a look at the new tax law changes and how they may possibly affect our clients and other retirees. Marty Plecinoga, Compass Point co-owner and licensed advisor, notes, “The tax law changes for standard deductions appear to be a benefit to most retirees, particularly those who have paid off their mortgages completely or are paying mostly principal on their mortgages. While the personal exemptions have been eliminated, most tax professionals we spoke with agree that the big increase in standard deductions offsets this in many cases.”
Marty also suggests thinking about creating a charitable giving plan in response to the tax law changes. He reports that “many experts predict a drop-off in charitable giving as a result of the tax law changes and the increases in standard deductions. While giving is not about tax deductions, many taxpayers will choose not to itemize their deductions and therefore not give, meaning that many charities will likely be underfunded in the coming years.” For individuals who have historically made significant charitable contributions, Marty suggests projecting how much you intend to give over the next five years and make a large contribution in the current tax year that exceeds or matches the standard deduction, or save those dollars to make a large contribution a few years down the line.