New Tax Law Has Negative Side Effects for Retirees

New Tax Law Has Negative Side Effects for Retirees

New Tax Law Has Negative Side Effects for Retirees

Getting ready to retire? Just recently called it quits? If you haven’t already filed your taxes, then you might be in for some surprises, thanks to the new tax laws. Retirement is supposed to be a bed of roses, but of course, life doesn’t always go as planned. So what changes do you need to know about taxes in retirement that could have a big impact?

Property Tax Deduction Is Limited

Perhaps the biggest change is the limit on the property tax deduction. This change is hurting taxpayers from all walks of life, not just retirees. The problem is the amount of property taxes you can deduct is now limited to just $10,000. So, if you have more than that you’re out of luck. Unfortunately, many retirees do pay more than $10,000 in property taxes.

If your property taxes are less than $10,000 this change won’t affect you. However, if you own a second home, or had plans to purchase a second home, this new limit could change your plans.

Mortgage Interest Deduction Is Down

Another strike against owning a second home is the change to the mortgage interest rate deduction. The rate hasn’t changed for homes purchased before January 1, 2018. But if you want to purchase a new home now, you can only deduct interest on mortgages of up to $750,000. That number is down from $1 million under the old law. That means, if a second home was part of your retirement plans, you could have to reconsider.

Home Equity Loan Rules Have Changed

Under the previous system taxpayers used home equity lines of credit as a great way to make purchases on non-housing items. Well, no more, under the new system. You can still use these types of credit lines for other things besides your home, but you can no longer deduct the interest from these credit lines, unless you use the money on the home for which the loan was borrowed. It’s another rule change that could affect your retirement plans.

Fewer Combined Itemized Deductions

The $10,000 limit on the SALT deduction has been tough on many taxpayers, especially those that live in high tax states. In the past you could deduct the entire amount of your state, local, real estate and sales taxes. For those with higher taxes, this was a huge benefit. However, that has changed because the SALT deduction has been capped at $10,000. That means, no matter how much you pay in these taxes combined, you only get to deduct $10,000. This is another downside to purchasing a second home in retirement, as you could only deduct the mortgage interest from one of both homes up to $10,000.

Investment Management Fees Aren’t Deductible

Another common source of income for retirees, and the ultra wealthy, is investment funds. And many investors, especially retired investors hire someone to manage their investments. In the past, you could deduct the fees for investment management. But under the new law, these fees are no longer deductible. This could especially hurt more affluent retirees.

 

We hope you found this article about “New Tax Law Has Negative Side Effects for Retirees” 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.

To receive our free newsletter, contact us here.

Subscribe to our YouTube Channel for more updates.

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.

 

American-Dreams-Show-Accounting-firm-in-ca-cpa-tax-advisors-groco-alan-olsen

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…

Untitled_Artwork copy 4

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.

Posted in

Will Your Tax Refund Be Delayed?

It’s only January, but because the calendar has turned to 2015, that means the tax season is officially here. While most people don’t file their taxes in January, there are a few early birds who go after the first worms of the year, so-to-speak. Although it’s often a good idea to make sure the IRS,…

Are You Looking To Invest for Growth?

What kind of investor are you? There are many types of investment strategies and each person will follow the strategy that best fits his or her plan. At GROCO, we can help all kinds of investors, including those who are investing for growth. When it comes to long-term growth, the total return on your investment…

Not Living on the Earth? You Still Have to Pay Your Taxes on Time

You gotta hand it to the IRS for being thorough. They’ll leave no stone unturned in an effort to make sure that every taxpayer files their return. That’s even true of very big stones, otherwise known as asteroids. In other words, even if an astronaut wanted to hide behind an asteroid or a moon rock,…

With Gas Prices Down, Could Gas Taxes Be Going Up?

Rich or poor, young or old, no one likes high gas prices – with the possible exception of oil and gas companies. In any case, the recent drop in gas prices around the country has no doubt brought some relief to just about everyone in America, including big corporations that own large fleets of vehicles.…