How The New Tax Law Directly Benefits Families

Tax Law

How The New Tax Law Directly Benefits Families

Since December 22, 2017 there has been a flurry of news articles all talking about the same thing. Taxes. Well, rather the new tax law that just signed, the Tax Cuts and Jobs Act (TCJA). One of the biggest winners of this new law is American families, especially considering that most of the middle class is having this tax bill lowered by it. This article details several key points that have been adjusted and how the changes benefit you.

Child Tax Credit
Thinking about having kids? Well thanks to the TCJA it is now more affordable to do so. Under the previous tax law, the child tax credit (CTC) was a $1,000 per child and phased out at different incomes ($55,000 for married couples filing separately; $75,000 for single, head of household, and qualifying widow or widower filers; and $110,000 for married couples filing jointly). However, under the TCJA, the CTC increases to $2,000, which is a hefty increase. Couple that with the tax credit phaseout for the CTC increasing to $200,000 (or $400,000 for joint filers) it is a very good thing for families, especially since the CTC is refundable up to $1,400).

Paying for School
529 savings accounts are accounts that can be used to put taxed money into plans to help save for college. The money in the accounts can then be invested and it will grow tax-free. Additionally, 33 states offer state tax deductions or credits as well. When it comes time to pay for college, the money can then be withdrawn and used tax-free for education related expenses. The new TCJA maintains the basic status of the accounts and (thanks to Senator Ted Cruz) has added to them. The money placed into these accounts can now be used to pay for expenses related to private or religious K-12 education. Meaning for those of you who are looking to put your kids in private school, now is a good time to start saving up do to so.

Alimony
Maybe your family has suffered a divorce and you are now receiving an alimony payment. Well for the person making the payment, they can no longer deduct it as an expense. However, the person receiving the payments will no longer need to pay tax on the income received. Granted, this doesn’t kick in until January of 2019, however if they would prefer, ex-spouses can modify their existing agreements to have this new tax law come into effect.

Kiddie Tax
Currently if a child collects unearned income above $2,100, the money is taxed at the parent’s tax rates rather than the child’s, if the parent’s rate is higher. (Children are individuals under 19 or students going to school full time under 24.)

Under the new law the net unearned income is taxed under the brackets used for estates and trusts, which has a top bracket of 37% starting at $12,500. This will largely not affect those from higher income families since they are paying similar rates, however those in middle class families whose children’s portfolios are doing well could feel more of a pinch. For those children with smaller amounts of unearned income, they come out slightly ahead on this new plan

For more information on how the tax law will affect you and your family and how you can plan for it, contact us at GROCO!

We hope you found this article about “How The New Tax Law Directly Benefits Families” helpful.  If you have questions or need expert tax or family office advice that’s refreshingly objective (we never sell investments), please contact us or visit our Family office page  or our website at www.GROCO.com.  Unfortunately, we no longer give advice to other tax professionals gratis.

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Alan Olsen, CPA

Alan Olsen, is the Host of the American Dreams Show and the Managing Partner of GROCO.com.  GROCO is a premier family office and tax advisory firm located in the San Francisco Bay area serving clients all over the world.

Alan L. Olsen, CPA, Wikipedia Bio

 

 

GROCO.com is a proud sponsor of The American Dreams Show.

 

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The American Dreams show was the brainchild of Alan Olsen, CPA, MBA. It was originally created to fill a specific need; often inexperienced entrepreneurs lacked basic information about raising capital and how to successfully start a business.

Alan sincerely wanted to respond to the many requests from aspiring entrepreneurs asking for the information and introductions they needed. But he had to find a way to help in which his venture capital clients and friends would not mind.

The American Dreams show became the solution, first as a radio show and now with YouTube videos as well. Always respectful of interview guest’s time, he’s able to give access to individuals information and inspiration previously inaccessible to the first-time entrepreneurs who need it most.

They can listen to venture capitalists and successful business people explain first-hand, how they got to where they are, how to start a company, how to overcome challenges, how they see the future evolving, opportunities, work-life balance and so much more..

American Dreams discusses many topics from some of the world’s most successful individuals about their secrets to life’s success. Topics from guest have included:

Creating purpose in life / Building a foundation for their life / Solving problems / Finding fulfillment through philanthropy and service / Becoming self-reliant / Enhancing effective leadership / Balancing family and work…

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MyPaths.com (Also sponsored by GROCO) provides free access to content and world-class entrepreneurs, influencers and thought leaders’ personal success stories. To help you find your path in life to true, sustainable success & happiness.  It’s mission statement:

In an increasingly complex and difficult world, we hope to help you find your personal path in life and build a strong foundation by learning how others found success and happiness. True and sustainable success and happiness are different for each one of us but possible, often despite significant challenges.

Our mission at MyPaths.com is to provide resources and firsthand accounts of how others found their paths in life, so you can do the same.

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