Broker Check


| June 25, 2018

The Tax Cuts and Jobs Act passage in December made major changes in tax law.  Most everyone has made decisions on buying homes, getting home equity loans, paying mortgages, making donations, and funding college – among others - based on tax law that has changed very little since President Reagan signed the 1986 Tax Reform Act into law.

Tax planning is a very important part of your financial plan, affecting your cash flow both today and in the future.  Your decisions based on old tax law may no longer benefit you.

For instance, the standard deduction for married couples has increased to $24,000 from $12,700.  Your mortgage interest, state taxes, and donations may not now be greater than the standard deduction.  Paying off the mortgage becomes a bigger question when you may receive no tax benefit by paying interest, even if it is at a low interest rate.  You may want to look at “bunching” charitable contributions and donations in one year rather than spreading them out over several years, so that you can get a larger tax benefit by itemizing in one year and taking advantage of the standard deduction in others.

Thinking about paying off credit cards or buying a car with a home equity loan?  Interest on home equity loans and cash-out refinance loans where the funds are not used to substantially improve your home may no longer be deductible.  Miscellaneous expenses such as unreimbursed employee expenses and professional fees aren’t even a line item on the new tax return.

Lastly, you may want to look at your retirement plan contributions.  With decreased tax rates, there may be less of a benefit to contribute to the tax-deferred IRA or 401K option.  Instead, you may want to consider contributing to a Roth IRA or Roth 401K option, choosing to pay lower taxes today than what may be in place when you withdraw the tax-deferred funds in your later years.

I encourage everyone to dust off the old financial plan and review strategies to make the best use of your money in this new era.







Laura Mickels has spent more than 30 years working for investors with both Wall Street and independent firms.  CochranMickels Retirement Specialists provides personalized planning and investment services to individuals approaching and in retirement.


These are the opinions of Laura Mickels and not necessarily those of Cambridge, are for informational purposes only, and should not be construed or acted upon as individualized investment advice.