12 Tips to Traverse the 2017 to 2018 Tax Transition


Since the passing of the Tax Cuts & Jobs Act, there have been a number of comprehensive articles summarizing the year over year changes. While these pieces are informative, they often lack clear calls to action – specific planning tips that should be considered under the new tax regime. Below, we attempt to fill in the gaps, outlining twelve of the most useful considerations we have come across.


Lump multi-year charitable giving into one year, utilizing a Donor Advised Fund (DAF). Most taxpayers might not be able to itemize their deductions under the new laws. This strategy allows the taxpayer to itemize, taking the deduction for the entire contribution in the year it was contributed to the DAF because the total amount now exceeds the higher standard deduction. Charitable contributions out of the DAF, can then still be spread out over several years.

Divorce & Alimony

In the process of a divorce? Finalize it prior to December, 31st 2018. Starting in 2019, alimony tax law changes will result in a lose-lose scenario for both ex-spouses. Currently, the spouse who pays alimony receives a tax deduction, and the spouse who receives it, pays tax on alimony income. Next year, both the deduction and the tax will go away, which will leave less after-tax money to be split amongst the ex-spouses.


Consider moving to a lower tax state. The new laws limit the deductibility of the state, local, and property taxes to $10,000 (combined). As a result of losing the state/property tax deductions, high income earners and/or home owners, with flexible occupations, may consider moving to a state with a lower (or no) income tax.


Use a 529 savings plan to pay for pre-college education expenses.  Previously, 529 savings were only available to be used for post-secondary education expenses. Under the new laws, up to $10,000 per year can be used to pay private school expenses. If you expect to pay for pre-college expenses, increase your 529 savings to take advantage of tax-free growth.

Health & Medical

Lump your planned multi-year medical expenses into one year (i.e., 2018). The new laws (temporarily) retained the deduction for medical expenses, and expanded the deduction by reducing the threshold to 7.5% of income.


Employees, if you Itemized your deductions last year, consider updating your W-4 to increase the amount of your W-2 withholdings. Otherwise, you might owe taxes in 2019 (when filing your 2018 tax return); you might even be subject to surprise underpayment penalties.

Business owners, consider planning techniques to take advantage of the 20% deduction for pass-through businesses. Work with your accountant to optimize business tax strategies under the new law.

While many of the “below the (AGI) line” deductions went away, or were reduced, tax liability can still be minimized by concentrating on the “above the line” deductions. Maximizing retirement plan contributions and using a Flexible Savings or Health Spending account will reduce your taxable income.


Take advantage of tax-rate arbitrage on Roth IRAs. It is still not too late to make a 2017 Traditional IRA contribution, getting a deduction (if you qualify) on income taxed at the higher 2017 rates. You can then proceed with a “Backdoor Roth” conversion, at the lower 2018 rates. Even if you do not (or cannot) take advantage of the 2017-2018 arbitrage opportunity, you should still consider the (now even more) appealing Backdoor Roth strategy in 2018.

Reconsider making Roth 401(k) contributions [vs. Traditional 401(k)]. Due to the slightly lower ordinary tax rates under the new tax law, the deduction for making the contributions into a Traditional 401(k) is now worth a little less. Likewise, the likelihood that your tax rates in retirement will be higher than current has increased. If you are still not sure, consider splitting Roth and Traditional 401(k) contributions.

Harvest tax losses and consider optimal asset location. The new law has eliminated a number of investment related Itemized deductions. To reduce their investment income tax liability, instead of previously relying on investment deductions, taxpayers should do their best to take advantage of strategies which allow them to reduce their taxable investment income.

Vacation Home

Consider selling or renting out your vacation home. The $10,000 limitation on state/local/property tax and the $750,000 limitation on mortgage interest deductions will likely mean that the vacation home owner will not be able to itemize some, if not most, of the expenses related to that property. If the house is rented, these expenses will be able to be deducted on Schedule E. If you actually previously lived in the vacation home for two out of the last five years, you should likely quality for a capital gain exclusion ($250,000 for single or $500,000 for a married couple filing jointly). In that case, you may want to think through the pros and cons of selling vs. renting.

Please reach out to us if you’d like to learn more about any of these strategies, or if you have other questions relating to the new law under the Tax Cuts & Jobs Act. If the question is “above our pay grade,” we’ll be happy to introduce you to accountants, attorneys, or other knowledgeable professionals that could be a part of your “intentional team of advisors”.

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