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, 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.
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…
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.
Hello? Is This Really the IRS, or Just a Scam?
No one enjoys getting a call from the IRS, but getting a call from someone who claims to be from the IRS, but who is really just a scammer, is even worse. However, according to the country’s top tax agency, that is exactly the kind of sophisticated and elaborate scam that has been going on…
United States and Singapore Buddy Up on Tax Evasion
For those who are still not convinced that the United States is serious about tracking down tax dodgers who are trying to hide money in offshore accounts, here’s one more piece of evidence that might change your mind. In a deal announced last week, the country of Singapore says it has come to terms with…
IRS Overpaid by $6 Billion in Child Tax Credits in 2013
Although no one will probably ever shed a tear to hear that the IRS paid taxpayers too much money, this latest report does nothing to breed confidence in how things are run in the nation’s tax collecting agency. According to reports, the IRS paid about $6 billion in child tax credits last year to people…
Small Business Stock Gain Exclusion Receives 2014 Extension
It’s not like the government to bring everyone some well-needed Christmas cheer, but the new tax bill that lawmakers were finally able to pass brought some good news for many investors before the year ends. It’s unfortunate that it took the entire year to get it done, but at least the tax provisions that did…