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Tax Strategies for the New Year

Some of you may have heard the news: there was a new tax law that passed both houses of Congress, it was signed by the President, and the Supreme Court has not considered it illegal. This trifecta is a rare feat, indeed! Now, we still do not know 100% of what the tax plan entails but what we do know allows us to consider a few strategies for our clients. Here are a few to mull over for 2018:


Let’s begin with the definition of required minimum distribution (“RMD”). Your RMD is the amount of money that the IRS requires you to take out of your pre-tax qualified accounts (401k, Roth 401k, 403b, IRA, IRA annuity, 403b, 457, etc.) after you reach age 70-1/2. The RMD to Charity transfer is an older rule that allowed you to gift your RMD directly to a qualified charity and deduct the charitable contribution EVEN if you did not itemize your taxes. This is a special rule that is applicable for RMD to Charity transfers only.

Last year, if you itemized your deductions, you could gift money to your charity of choice and itemize the gifts on the Schedule A of your 1040. This RMD to Charity transfer would not have hurt or helped you because you were already deducting your charitable gifts. In 2018, everyone’s standard deductions have almost doubled and therefore you may not be able to deduct the charity contributions anymore. Instead of making charity donations from your pocket or bank account, it may be beneficial to give to a charity directly from your RMD.  Look at it this way, you would have needed to take the money out anyhow and under this rule, you’ll be able to deduct it off your tax return!

Lastly, because many of our clients have Charles Schwab as the custodian for their accounts, we can set up a check book that is tied to your IRA allowing you to write a check to your favorite charity from your IRA and it will count as a RMD to Charity transfer. This is a very nifty feature!

Let us know if you are interested in hearing more!


A Roth Conversion is the process where you take money from your IRA and convert it into a Roth IRA. You pay ordinary income taxes on the amount that you convert, but once the money is in a Roth IRA,  the withdrawals will be tax free to you and to your beneficiaries regardless of how much the account grows! Roth IRAs can be very powerful. Though the future tax-free growth is a great benefit, there is an additional strategy that involves using Roth Conversions to your tax advantage.

Use the following numbers as an example: Before you and your spouse, if applicable, draw Social Security (“SS”), and before you start to take RMDs (see above for definition) at 70-1/2, you are in a nice, low tax bracket of 10%. But, once you turn on your SS and your RMD, you are in a high tax bracket of 20%. If, before you turned on your SS and RMD, you converted IRA money to Roth money and brought your taxes to 15% now (remember, conversions are taxable!), that 15% is still lower than 20% when your SS and RMD are turned on. Therefore, in this example, you would be saving 5% on taxes on the amount that you converted.

Now that we understand how a conversion works, what does the new tax plan mean for Roth Conversions? The new tax law allows for more people to benefit from doing a Roth Conversion and it allows for potentially larger Roth Conversions for those who are already doing an annual Roth Conversion. If this type of conversion interests you, make an appointment and we will work together to figure it out!


This one can be very complicating, but let’s start with the 20,000-foot view. If you receive income from pass-through business (e.g. sole proprietorship, partnerships, S corps) you may be able to take 20% of that income as a tax deduction. For example, if your spouse earns $20,000 from part-time at a hospital and you are self-employed and making $15,000, then under this new law, you may be able to take $3,000 as a tax deduction ($15,000 * 20%).

Now, there are many stipulations that determine whether you can take the deduction. For example, the IRS may not allow businesses that are considered “professional businesses” (e.g. accountants, financial advisors, lawyers) to take the deduction. Second, there is an income limit on all other businesses. Third, tax experts are still in the process of trying to figure out the details of this rule.

The key for this rule is to know that it exists and start working with your CPA now so you can plan for next year’s tax return.

Overall, the new tax plan adds new rules and subtracts others. We are not CPAs or tax accountants. It is very important to work with your CPA and/or tax accountant on these strategies. Doing them right can benefit you very much, but doing them wrong can have the reverse affect. Do not take this article as your sole source of what you should do for your tax plan. Not only are we not CPAs or tax accountants, but it would be a mistake to not look at your entire financial picture before enacting these strategies.