2018 Tax Q&A
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2018 Tax Q&A

By April 17, 2018No Comments

How does the new tax bill affect 529 Savings Plans and what impact do you feel it will have on the markets/economy?

Under the new plan, up to $10,000 of 529 Savings plan money can be used to pay for tuition at an elementary school or secondary public, private or religious school as well as expenses for home schooling. Previously, 529 plans were used for “higher” education expenses. I think that asset gatherers like Fidelity, Vanguard and T. Rowe Price would benefit from this expanded use of 529 plans.

What change does the new tax bill have on state and local tax deductions and what impact do you feel it will have on the markets/economy?

The new law caps the state and local tax deduction (SALT) at $10,000 annually, for any combination of state and local property taxes or combination of state and local income taxes or sales taxes. This limit sharply reduces the tax deductions for many residents in high-tax states like New York. I think that states like Florida could benefit as investors may look to purchase income properties there in anticipation of a further migration to the Sunshine State.

What other notable change does the new tax bill have on allowable deductions and what impact do you feel that change will have on the markets/economy?

Under the new law, interest on home equity loans used to pay for personal living expenses (like credit card debt) or college is no longer deductible. As a result, families may want to consolidate their home equity line with their first mortgage, so the interest can be written off. I think that mortgage companies and top bank lenders like Wells Fargo, Bank of America and Chase could benefit.

What change does the new tax bill have on the bonus depreciation deduction and what impact do you feel it will have on the markets/economy?

The new law doubles the first year “bonus depreciation deduction” from 50% to 100% but it phases out after 5 years. The deduction generally will not be available after 2026. This and other changes in the new tax law can be confusing, so I think that companies like H&R Block that provide tax services may benefit.

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