Wealth Management Blog | WrapManager

Katie O'Connor

Director of Client Services

4 Ways the New Tax Law Can Reduce Your 2018 Taxable Income

Posted by Katie O'Connor | Director of Client Services

September 19, 2018

4 Ways the New Tax Law Can Reduce Your 2018 Taxable Income

A recent survey from the American Institute of CPAs found that 63% of individuals who either have $250,000 in investable assets and/or $200,000 in household income were likely to tweak 2018 financial planning strategies as a result of the new tax law.

Most of the respondents indicated that ‘tweaking’ their financial plans would be in an effort to reduce taxable income, and the 2018 Tax Cut and Jobs Act offers a few new methods to do just that.¹

Here are four:

Lump Your Charitable Contributions Together – in the new tax law, the charitable giving deduction has remained in place for taxpayers who itemize. The thing is, however, that many taxpayers are expected to take the standard deduction in 2018 instead of itemizing, since it has jumped to $12,000 for individuals and $24,000 for married couples.

One method to get over the standard deduction, however, would be what many CPAs call “bunching,” or making a few years’ worth of charitable donations in a single year. That way, you could itemize your deductions in one year, and perhaps take the standard deduction the next.

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It’s a Family Affair: Talking to Your Family about Financial Planning

August 15, 2018

The “Godfather of Soul,” James Brown, had a noble vision for how he wanted his assets distributed after his passing. His will had set aside $2 million for his grandchildren’s education, and he would also set aside millions of dollars for the education of underprivileged children in Georgia and South Carolina. Eleven years after his passing, not a penny has gone to these beneficiaries of his will. The reason: ongoing legal battles, as family members challenge Mr. Brown’s will in court and multiple parties argue over the assets in his estate. More than a dozen lawsuits have been filed since Mr. Brown passed away in 2006, and one of them involves nine of Mr. Brown’s children and grandchildren suing the estate’s administrator as well as Mr. Brown’s widow, Tommie Rae Hynie.[1] James Brown carefully crafted his estate plan to focus on education and his community, yet his wishes are arguably yet to be fulfilled. It leaves one to wonder: what if Mr. Brown had gathered his entire family together, had very frank and candid discussions about his estate plan, and told his family explicitly that they were not to challenge his wishes. Where would his estate be today? [+] Read More

Do You Live in One of the Wealthiest Parts of the Country?

June 27, 2018

For nearly 20 years WrapManager has been headquartered in the San Francisco Bay Area, which is notoriously (based on hard data) one of the most expensive areas in the world. And while we are a nation-wide investment manager, it comes as little surprise (to us at least) that 21 of the 100 wealthiest cities in the US are in California, with most them in the San Francisco Bay Area. This fun fact may have some readers now wondering what the 100 wealthiest cities/communities are, and whether you might live in one of them! (It left us quite curious.) Well, thanks to a Bloomberg analysis of 2016 US Census data, now you can find out. [+] Read More

Legacy Planning with Donor Advised Funds

May 16, 2018

If part of your legacy and estate planning involves giving to charity, you may want to consider Donor Advised Funds (DAF). DAFs are not generally telegraphed as a solution for investors with charitable inclinations, but perhaps they should be – DAFs offer a unique approach to giving assets, potentially growing your assets, and then donating them to the charity (or charities) of your choosing – all in a tax efficient manner. So What Are Donor Advised Funds Exactly? The IRS defines them as a fund or account operated by a charitable, 501(c)(3) organization, which is known as a “sponsoring organization.” Once a Donor Advised Fund is established at a sponsoring organization, contributions are made to the account by individual donors. These contributions can range from anything to cash, or mutual funds, or commercial or residential real estate, to life insurance policies and more. Once the donor makes the contribution, the sponsoring organization has legal control over it, but the donor is generally entitled to an immediate tax deduction associated with the charitable contributions and would also maintain control over the investment management and distribution of funds from the account. [+] Read More

Aging in Place: Retirement Planning for Home Care Costs

February 20, 2018

In the context of retirement planning, most people are naturally drawn to talking about travel, hobbies, grandchildren, and leisure activities. And for good reason – that’s what retirement is supposed to be all about! There is a necessary distinction between retirement and retirement planning, however. Planning must go beyond the ‘fun’ items and consider all expenses we may incur over time and throughout life. One of those expenses – and a major one – is the cost of health and home care later in life. [+] Read More

The Cost of Having a Child

February 14, 2018

There are numerous planning considerations involved when starting or expanding your family -- lifestyle, career, living space…the list goes on. Arguably the financial component is near the top of the list. Most people planning for family know that it will impact their finances, but to what extent? Using data compiled by the U.S. Department of Agriculture (USDA), the estimated cost for a married couple on the West Coast (with a combined income greater than $107,000) to raise two children would be a somewhat startling $775,620. Dig-in a little further, and the data suggests that around $166,000 would go towards education/child care. The family could also spend upwards of $110,000 on food alone. The data and estimates are based on a study performed by the Department of Agriculture titled “Expenditures on Children by Families, 2015”. The USDA created a fascinating and free calculator that anyone can use to run the numbers for starting a family. You simply tell the calculator how many children you have or want, your income level, whether you’re single or married, and what region of the country you live in. And that’s it! The calculator does the rest. [+] Read More

Navigating Your Finances Through Divorce

January 22, 2018

There’s really no way to sugarcoat it – though relationships are often filled with love and beauty, they can also be complicated and sometimes difficult to sustain over time. In recent years, January has earned the dubious honor of being nicknamed “Divorce Month,” as analysis of divorce filings between 2008 and 2011 revealed a spike in divorces in January through March.1 Life changes like divorce or separation almost always call for major financial adjustments, which can often feel like insult to injury. But it doesn’t have to be that way – working with your financial advisor can help you work through the process professionally, and can also prevent emotion from sifting into financial decision-making. That’s key to eliminating some of the financial consequences of divorce. [+] Read More

Have you heard of the “January Effect”?

December 27, 2017

You many have heard people speak about the "January Effect," but what does it actually mean? In short, the January Effect is a concept suggesting that the first month of the year tends to experience a seasonal increase in stock prices. Some even take the anomaly a step further, suggesting that a positive January means a positive calendar year. With January around the corner, does the “January Effect” concept hold water? Let’s investigate. [+] Read More

What is Tax Loss Harvesting?

October 25, 2017

The White House released an outline for major tax reform in September. There are some ambitious goals in the plan: reduce seven individual tax brackets down to three, lower the corporate tax rate by 15%, eliminate the estate tax, nearly double the standard deduction while eliminating most itemized deductions, and much more. There could be some major changes ahead. But since so much remains up in the air as Congress debates the issue and actually writes the new law, it may not be worth diving into the details just yet. Instead, we’ll focus on a tax issue that is fast approaching for many investors: tax loss harvesting in preparation for your next tax filing. [+] Read More

Protecting Your Online Identity: Simple Steps for Better Internet Security

October 13, 2017

In light of the increased security concerns caused by the Equifax data breach and the increased extent of the Yahoo data breach, we feel it is important to remind clients of ways that you can protect yourself from identity theft and other data theft. Below are four easy steps that you can take today to help protect your internet security. [+] Read More