e, being a thoughtful spouse, paying real estate taxes, and
orrying about the overall health of your lawn. My wife may
t share that last sentiment...
INDUSTRY INSIGHT
YOUR FINANCES
has been the most exciting, joyous, and fulfilling time of
y life. That said, even as a financial planner, it hasn’t been
thout its nagging thoughts: Am I saving enough? Am I
king advantage of my benefits through work? Should I be
inking about saving for college already? Would my fam-
be okay (financially) if something terrible happened to
e? Should I have an axes
estate
plan in Taxes
place?
What the changing.
heck
are painful.
are constantly
a Bumbo?
Taxes will never ever go away. Wow,
SPONSORED CONTENT
2018 TAX LAW CHANGES:
WHAT DO THEY MEAN TO ME?
T
individual who receives 1099 income for consulting or contract
work. Note that there are a lot of nuances to this rule
that still need to be ironed out. Before jumping for joy,
reach out to your accountant to see if it’s something
that you can actually benefit from.
what reassuring and uplifting sentiments!
though a lot of these Unfortunately,
issues are uncomfortable
to discuss
these are undeniable
d an added truths.
expense
during
an
already
expensive
time,
The recent changes under the Tax
ndling them Cuts
now and
will
not Act
only
peace
Jobs
will give
shake you
things
up of mind but
olid foundation
securing
your
future.
more for
than
usual. The
big family’s
question financial
is: For
SO HOW WILL THIS IMPACT ME?
As with all tax changes, some will benefit and
better or worse? Now that the 2017 tax
some won’t. What I’ve personally seen with many of
season is coming to a close (for most),
ollege Planning
our clients, however, is that most families will realize
I’d recommend
reaching
out to your
you know, college
is already
an (almost
illogically) expen-
a tax savings. Let’s take a look at a
accountant
and/or
planner the
to get
ve journey. That,
however,
is financial
not slowing
majority of
hypothetical scenario:
better handle on how your family will be
A married couple with a 3-year-
ivate colleges a from
increasing tuition year after year. If it’s
impacted by these changes.
old and a 6-year-old. They live in Mt.
ur family’s wish to help cover some or all of these costs,
Although everyone’s taxes will be affected
Lebanon and earn a combined income
art saving when they’re in diapers. The earlier, the better.
differently, I wanted to outline a few of the
$200,000.
They pay
$12,000
annual real
you’ve reached retirement, of
you’re
no longer
relying
on in wages
ok to establish a 529 plan and set up an automatic month-
meaningful, big-picture adjustments in this article.
estate
taxes
and
have
current
mortgage
interest of
to sustain your fam ily’s lifestyle. From that mindset, term
contribution for an amount that fits into your cash flow.
LOWER
MARGINAL
TAX
RATES
$11,000.
They
also
contribute
$5,000
to
charity
life insurance is truly the most effective (and cheapest!) way each
u won’t even notice it after a few months. Also, let the
This
is
something
you’ve
already
noticed
if
you
year. In this example, their total deductions were slashed
to go.
andparents know. They just may want to lend a hand.
receive W-2 wages. Around February of this year, you
from $53,000 to $26,000. As a result, their federal taxable
likely received a bump in your net take-home pay.
increased
from
to $174,000.
So how do you income
know how
much
to $147,000
purchase?
If you’re Ouch.
not
ork Benefits
This is due to the fact that federal tax brackets have
On a positive note, however, they picked up an
running a thorough analysis on your existing portfolio,
though there been
are condensed
many and for
they
will
differ
from
company
2018. To give you an idea—in
additional $4,000 of child tax credits. In the past, their
anticipated growth, and future cash flow, a good rule of
company, I 2017,
wanted
to highlight
one in
particular—the
a married
couple incurred
a tax
rate above
earnings precluded them from taking advantage of this
thumb is 10x salary. Have a qualified adviser go out to bid
ependent Care
Spending
This account
25% Flexible
once taxable
income Account.
reached $153,100.
In 2018, you’re not
credit. That $4,000 translates into a dollar-for-dollar reduction
to find a reputable insurance company that will provide that
ows the parent
set aside
before
taxes
in order
taxed to beyond
25% income
until income
exceeds
$315,000.
on their taxes due. All things equal, this couple will save roughly
coverage at $4,500
the in
most
cost-effective rate. If you’re not in
help pay for the costs of childcare. Depending on your tax
taxes from 2017 to 2018. A reduction of almost 15% of
PERSONAL EXEMPTIONS & ITEMIZED DEDUCTIONS good health, if you
smoke,
or have a family history of heart
acket, this can easily save you 20 to 30% on what you elect
their tax bill!
Perhaps the most-discussed aspect of the new tax code has
contribute.
disease, for instance, the low-cost alternative may be to
been the elimination of personal exemptions and the reduction
PROACTIVE
obtain that BE level
of coverage through your employer. They
in itemized deductions.
Don’t
wait until you
file your at 2018
taxes
a year
from
will
likely
offer
guaranteed
coverage
group
rates
for
up now
to to
fe Insurance • State and local taxes, along with real estate taxes, will now
begin planning for these changes. Reach out to your accountant
some multiple of salary.
e focus of life insurance
is to cover
period As
of a time
in
share a maximum
limit of a $10,000.
Mt. Lebanon
resident
and a CERTIFIED FINANCIAL PLANNER® this spring to run a
hich your family with
is financially
vulnerable.
This break.
window
lofty school taxes,
that’s a tough
projection for your family. You may find yourself in a favorable
Continued.
liability typically
exists on
during
Once lines of
• Interest
home your
equity working
loans and years.
home equity
position to increase savings or pay down debt faster,
without
credit will only be deductible if it’s deemed to be acquisition
impacting your regular cash flow. This will undoubtedly benefit
debt. Ultimately, that would be financing used to buy,
your financial well-being in both the short and long term.
construct, or improve your home.
CHILD TAX CREDIT
For many young families, this will be the difference maker.
Before 2018, a child tax credit of $1,000 was available for
children under age 17. That has now doubled to $2,000. Just as
importantly, though, is that families with modified adjusted gross
income (MAGI) up to $400,000 can now fully claim the credit. In
the past, they would have been completely phased out at only
$130,000 of MAGI.
In a similar vein, there’s also a “family credit” of $500 for each
qualified dependent. This would include kids in college, an aging
parent living with you, or even an adult child still on the payroll
(see “Failure to Launch”).
PASS-THROUGH BUSINESS INCOME DEDUCTION
The gist of this new regulation is that business income passed
through to a personal tax return may qualify for a 20% deduction.
An example (one of many) would include a self-employed
This Industry Insight was written by Matthew D.
Kelly, CFP®.
As an adviser with Allegheny Financial Group, Matt
helps guide individuals and families toward achieving
their distinctive financial goals. Matt and his wife, Mia,
left the city life behind for Mt. Lebanon in 2016. A few
months later, they welcomed a son into the world,
and are enjoying family life in such a welcoming
neighborhood.
For a better understanding of how Matt could
work with you and your family, please call him at
412.536.8076 or email at [email protected].
Allegheny Financial Group is a Registered Investment Advisor. Securities offered
through Allegheny Investments, LTD, a registered broker/dealer. Member FINRA/
SIPC.
MT. LEBANON
❘
SPRING 2018
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