Now that one of the biggest pieces of tax legislation in more than 30 years is in effect, it is generating a lot of questions and concerns for taxpayers, both individuals and businesses. As a tax professional, this sweeping reform means that you need to be there for your clients more than ever.
Tax Reform Overview
At the end of 2017, one of the biggest tax reforms in history was signed into law. The expansive reform touches on many different aspects of individual and corporate taxes, most of which took effect January 1, 2018. So, what does this tax reform mean for advisors and clients? Sooner than you think, your clients will be reaching out to you for answers—if they haven’t already.
Many long-standing laws have been changed and there are many considerable adjustments that taxpayers will be making with regards to their tax returns. The new laws will will affect almost every taxpayer one way or another. Your clients are likely overwhelmed, confused, and anxious to have you guide them in navigating the changes they will see on their tax returns.
Here are just a few of the key areas of change with the 2017 tax reform:
- The child tax credit increases
- Individual tax rates trend down slightly
- The standard deduction almost doubles
- Corporate tax rates fall from prior levels
- Increased deduction for pass-through income
- Loss of personal exemptions
- Capped state and local tax deductions
- Limits on mortgage interest
Because the corporate tax changes are permanent and many of the individual tax changes expire in 2025, long-range tax preparation planning is more important than ever.
Start Planning Early
One of the most important things you can do for your clients is to set up a meeting with them to do some tax planning. Taxpayers want you to guide them through the complexities of the new laws and analyze how they will personally be affected.
During the planning meeting, you and your client should look at their individual tax situation and examine the opportunities they have to take advantage of anything in their favor. For individuals, they may be interested in the changes made to family gifting, Roth conversions, medical expense deductions, and whether it will be worth it to them to continue itemizing.
Business owners should also make changes to benefit from newly structured deductions on pass-throughs, common business deductions, and the new tax rates. Together, you can outline the right steps for them to take long before their tax returns are due.
It Pays to Be Prepared
You can’t afford to be unprepared for the next tax season with such dramatic new changes in store for your clients, both business and individual. It’s up to you to help them mitigate any negative impacts and maximize the benefits. The sooner you can get up to speed, the better it is for your clients and therefore your business.
Want to learn more about changes that have taken place since tax reform passed? Download our free ebook 7 Things to Know About the Changing Tax Environment.