Quick Take: A Note on the New Tax and Policy Bill

Congress recently passed a sweeping tax and spending policy bill with lots of long-term implications. Much of the news coverage has focused on its difficult legislative path and the potential political, economic and social consequences. But like many people, you’re probably wondering what this new legislation means for you and your family.

The full answer depends on the makeup of your family and the unique details of your finances. We will spend time with each of our clients individually to plot out specific courses of action. In the meantime, we want to highlight a few immediate implications worth considering:

The Key Benefit of Almost Any Tax Legislation: Certainty

On the whole, financial planning is a lot easier to do when you know what the tax code will look like in the future. With several tax provisions from previous legislation set to expire, Americans were stuck making important financial decisions with incomplete information. The passage of this bill removes much of that uncertainty.

In some cases, the bill preserves the status quo by making temporary provisions permanent. The lifetime estate and gift tax exemption was scheduled to sunset in December, dropping the exemption to $6 million from nearly $14 million. Instead, that higher exemption been made permanent and will increase next year to $15 million ($30 million for married couples).

The legislation also makes permanent the larger standard deduction—which will increase next year to $15,750 ($31,500 for married couples)—and the lower maximum mortgage interest deduction of $750,000.

Business owners can plan with the knowledge that the Section 199A deduction for qualified business income is now permanent and remains capped at 20%.

Time Is Running Out on Some Eco-Friendly Tax Incentives

Other recently enacted tax provisions are being cut short by the legislation. The bill brings a premature death to electric vehicle tax credits, which will expire at the end of September—seven years earlier than planned.

A suite of tax credits for clean-energy upgrades and energy-efficient residential and commercial properties are likewise on borrowed time. The expiration dates for these are staggered. If you’re planning a switch to solar or wind power, that credit expires at the end of December. Other credits will sunset later, but the clock is ticking to take advantage of any of them.

Complex Tax Law Requires Care and Expertise

Certainty doesn’t necessarily mean simplicity. Case in point: The bill’s temporary increase of the state-and-local-tax (SALT) deduction limit to $40,000 begins to phase out dramatically once modified adjusted gross income (MAGI) exceeds $500,000. Every dollar of income above that threshold decreases the maximum deduction by 30 cents. That is, until income reaches $600,000, at which point the limit has dropped all the way back down to $10,000—where it was before the bill passed. As a result, some taxpayers whose incomes fall within the SALT phaseout range may face more complicated decisions when considering financial moves that increase their income.

At around 900 pages total, the legislation is full of provisions that could impact your financial decisions in complex ways, whether you’re a business owner preparing to add a new location, a retiree planning strategic withdrawals or a working-age investor looking for opportunities to maximize your wealth over the long term.

That complexity can easily spark confusion. So if you’re unsure what exactly you should be doing to adapt your financial plan to account for the new tax rules, let’s talk. We’re happy to sit down and walk through what this big piece of legislation may mean for you and your money.


Multnomah Group is a registered investment adviser registered with the Securities and Exchange Commission. Any information contained herein or on Multnomah Group’s website is provided for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and, unless otherwise stated, are not guaranteed. Multnomah Group does not provide legal or tax advice.

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