Onward to Tax Year 2018

Did you finish your taxes? Technically you have until Tuesday, April 17th to file – and pay if you owe – because of Emancipation Day in Washington, DC on Monday, April 16th AND a Sunday being April 15th.


Last year was bitter-sweet for taxpayers and investors. The stock markets enjoyed gains, gains, gains in 2017 – almost the 9th year in a row – and the economy delivered mostly good things in the way of jobs and incomes. There are always exceptions, of course, but 2017 was mostly a great year economically and investments-wise. So even though you probably paid more in taxes and likely had less investment losses to offset gains, it was a positive year. Remember, rebalancing your portfolio is a critical tool but one that can create taxable gains — and an attentive, qualified adviser will guide you to minimizing inevitable taxes on a profitable portfolio.

This year, 2018, may be a slightly different story in several categories.

  • Taxes for some of the highest income generators who also live in expensive income tax States (NY, NJ, CA, IL, VT, CT, MN) could pay higher taxes – and have less deductions.
  • On the topic of deductions, as most people know by now (and it sets our hair on fire) there will be no deductions or less deductions for things like SALT (State and Local Taxes), property taxes, adviser feestax preparer fees and medical costs.
  • The charitable deduction seems to have stayed sacred (meaning unchanged) – so give it away generously to qualified charitable organizations if that is something that “lessens the tax blow”.

On the positive side, the Standard Deduction has been doubled AND the tax brackets adjusted mostly down to bring the marginal rate down a bit – mostly for those making less than approximately $200,000 (single) and $400,000 (joint). You may already have noticed small gains in your 2018 take-home pay, which is better than a sharp stick in the eye!

But instead of my going down the list of things you probably already know, I would suggest a handful of things to be aware of and to ask your adviser over the early course of 2018, so you are prepared come tax time next April.

  • In 2018 your pre-tax 401k contribution goes up to $18,500 (from $18,000 in 2017). These must be made in calendar year 2018. Remember to keep in mind the balance of traditional 401k contributions versus Roth 401k contributions NO MATTER HOW MUCH YOU MAKE. Ask me about this.
  • Tax-free income in the form of tax-free municipal bonds (some are Federal AND State tax-free) is still an important way to generate TAX-FREE income. Diversification is key with muni bonds.
  • The charitable deduction DID NOT CHANGE. This deduction could help you if you have a charitable organization where you want to be really generous.
  • Certain kinds of Trusts and gifts to heirs are still an effective way to minimize taxes during and after your life time.
  • I love this one: Embedded in the final Tax Law passed in 2017 was a sizable cut in federal excise taxes to producers of beer (large and craft), wine and spirits producers. The cut has been seen as trickling down to consumers (drinkers) and boosting jobs in the alcohol industry.

As a wise person told me a while ago, “Taxes are part of every successful investment strategy. Period.” Think about that while you are enjoying a craft IPA or a sip of Bourbon…or your beverage of choice.

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