As this is the first year many of us are subject to the new tax law, we have to figure out what it all means for our year-end tax planning and finances.
For starters, there are two questions everyone needs to ask:
Not only did the tax law adopted in December 2017 cut the top marginal rate from 39.6% to 37%, it also altered the income levels at which each rate kicks in. When determining your marginal and effective tax rates, also consider the effect of state and local taxes, as the tax act has capped your ability to deduct them.
The reduction in the top federal rate may be good news for you this year, but you’ll want to keep an eye out for bracket creep in future years. The new way of indexing for inflation is likely to result in higher tax rates being imposed at lower income levels.1
The tax act eliminated the personal exemption, but nearly doubled the standard deduction.
Still, before assuming the new standard deduction is for you—be sure to tally up any remaining qualifying deductions you may still have this year. For example, the charitable deduction was left untouched by the new tax law—and it may make sense for you to give this year all that you were thinking of giving over the course of the next several years; this way you may itemize and receive a current deduction.
Additional questions are individual-specific:
You may no longer be subject to the AMT. The new tax law increased AMT exemptions to $70,300 for those with single tax filing status, $109,400 for those filing jointly and $54,700 for married taxpayers filing separately, and also altered the exemption phase-out range.
If you live in a high-tax state, you’re likely acutely aware that the new tax law capped at $10,000 the deduction taxpayers may take on their federal returns for state and local taxes (SALT). That change threatens real pain to people who own homes across the United States.
What relief might you find from the diminished SALT deduction?
It is more essential than ever that you speak this year with your tax specialists—and your J.P. Morgan advisor is happy to work closely with you and those professionals to help ensure that your year-end tax planning supports your near- and long-term goals. Arm yourself for these conversations by reading our guide: “Your 2018 tax strategy: New twists, classic techniques.”
1Brackets are indexed using Chained Consumer Price Index-Urban (C-CPI-U). The provision requiring C-CPI-U for indexing does not sunset. C-CPI-U differs from the current Consumer Price Index measure (CPI-U) in that it accounts for the ability of individuals to alter their consumption patterns in response to price changes. Over time, expect this permanent law change to result in substantially more federal revenue.
Learn more about becoming a J.P. Morgan Private Bank client.
Please tell us about yourself, and our team will contact you.
Purpose of This Material
For Informational Purposes Only: JPMorgan Chase & Co., its affiliates, and employees do not provide tax, legal or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal and accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any financial transaction. The information presented is not intended to be making value judgments on the preferred outcome of any government decision.
The information provided may inform you of certain products and services offered by J.P. Morgan’s wealth management businesses, part of JPMorgan Chase & Co. (“JPM”). The views and strategies described in the material may not be suitable for all investors and are subject to risks. This material is confidential and intended for your personal use. It should not be circulated to or used by any other person, or duplicated for non-personal use, without our permission. Please read this Important Information in its entirety.
Legal Entity and Regulatory Information
Bank deposit accounts and related services, such as checking, savings and bank lending, may be subject to approval. Deposit products and related services are offered by JPMorgan Chase Bank, N.A. Member FDIC. are offered by JPMorgan Chase Bank, N.A. Member FDIC.
JPMorgan Chase Bank, N.A. and its affiliates (collectively “JPMCB”) offer investment products, which may include bank-managed accounts and custody, as part of its trust and fiduciary services. Other investment products and services, such as brokerage and advisory accounts, are offered through J.P. Morgan Securities LLC (JPMS), a member of FINRA and SIPC. Annuities are made available through Chase Insurance Agency, Inc. (CIA), a licensed insurance agency, doing business as Chase Insurance Agency Services, Inc. in Florida. JPMCB, JPMS and CIA are affiliated companies under the common control of JPMorgan Chase & Co. Products not available in all states.
We believe the information contained in this material to be reliable and have sought to take reasonable care in its preparation; however, we do not represent or warrant its accuracy, reliability or completeness, or accept any liability for any loss or damage (whether direct or indirect) arising out of the use of all or any part of this material. We do not make any representation or warranty with regard to any computations, graphs, tables, diagrams or commentary in this material, which are provided for illustration/reference purposes only. The views, opinions, estimates and strategies expressed in it constitute our judgment based on current market conditions and are subject to change without notice. We assume no duty to update any information in this material in the event that such information changes. Views, opinions, estimates and strategies expressed herein may differ from those expressed by other areas of JPM, views expressed for other purposes or in other contexts, and this material should not be regarded as a research report. Any projected results and risks are based solely on hypothetical examples cited, and actual results and risks will vary depending on specific circumstances. Forward looking statements should not be considered as guarantees or predictions of future events. Investors may get back less than they invested, and past performance is not a reliable indicator of future results.
Risks, Considerations and Additional Information
There may be different or additional factors which are not reflected in this material, but which may impact on a client’s portfolio or investment decision. The information contained in this material is intended as general market commentary and should not be relied upon in isolation for the purpose of making an investment decision. Nothing in this document shall be construed as giving rise to any duty of care owed to, or advisory relationship with, you or any third party. Nothing in this document is intended to constitute a representation that any investment strategy or product is suitable for you. You should consider carefully whether any products and strategies discussed are suitable for your needs, and to obtain additional information prior to making an investment decision. Nothing in this document shall be regarded as an offer, solicitation, recommendation or advice (whether financial, accounting, legal, tax or other) given by JPM and/or its officers or employees, irrespective of whether or not such communication was given at your request. JPM and its affiliates and employees do not provide tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any financial transactions. Contact your J.P. Morgan representative for additional information concerning your personal investment goals. You should be aware of the general and specific risks relevant to the matters discussed in the material. You will independently, without any reliance on JPM, make your own judgment and decision with respect to any investment referenced in this material.
J.P. Morgan may hold a position for itself or our other clients which may not be consistent with the information, opinions, estimates, investment strategies or views expressed in this document. JPM or its affiliates may hold a position or act as market maker in the financial instruments of any issuer discussed herein or act as an underwriter, placement agent, advisor or lender to such issuer.
References in this report to “J.P. Morgan” are to JPM, its subsidiaries and affiliates worldwide. “J.P. Morgan Private Bank” is the brand name for the private banking business conducted by JPM.
If you have any questions or no longer wish to receive these communications, please contact your J.P. Morgan representative.
© 2018 JPMorgan Chase & Co. All rights reserved.
INVESTMENT PRODUCTS ARE: • NOT FDIC INSURED • NOT A DEPOSIT OR OTHER OBLIGATION OF, OR GUARANTEED BY, JPMORGAN CHASE BANK, N.A. OR ANY OF ITS AFFILIATES • SUBJECT TO INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF THE PRINCIPAL AMOUNT INVESTED
Bank deposit products, such as checking, savings and bank lending and related services are offered by JPMorgan Chase Bank, N.A. Member FDIC. Not a commitment to lend. All extensions of credit are subject to credit approval.