Assessing the impact of tax reform on individuals

By Bari Faye Siegel

Assessing the impact of tax reform on individuals

Jo Anna Fellon, tax partner, Friedman LLP.

Recent changes to the Tax Reform Act have left many scratching their heads wondering how and if the new regulations offer relevant benefits and protections for individuals. According to tax accountants, as you consider the ramifications of the 2018 Tax Reform Bill, there’s one thing you should not do: bury your head in the sand.

In years past, you might have done the same-old, same-old: gathered your documents, sent them over to your tax professional and waited for a tax bill or a refund check.

What you should do this year, advised Jo Anna Fellon, tax partner at Friedman LLP, is learn how these laws can work for you. And, unless you are a tax professional, you need to reach out now for advice.

This year brought about the largest tax reform in 30 years.

“With these changes,” Fellon said, “people must now evaluate their position by talking with advisors who understand not only the law but your business so they can apply the laws that are in your best interest professionally and personally.”

In other words, urged Brian Kristiansen, partner at Friedman LLP, don’t wait another day.

“We know that business owners can benefit from several reforms and we believe there are definitely opportunities for everyone to benefit at the individual level, as well,” he said. “The key is to talk with someone who is prepared to analyze the new laws as they apply to you — [and]early.

Key points in the tax reform to consider:

  • Tax rate decrease:The marginal income tax rate has been lowered, which means that high income earners in the top bracket are finding relief from 39.6 percent to 37 percent. “But everyone will feel the benefits of these changes regardless of their income,” Kristiansen said.
  • Standard deduction increase: While the personal exemption has been eliminated for 2018, the standard deduction has almost doubled. “This increase in deduction, coupled with the decrease in tax rate, will allow taxpayers to keep more dollars in their bank accounts,” Fellon explained. Generally speaking, people who have been heavily dependent on itemized deductions in the past may not feel the sting of the loss of personal exemption when the lowered tax rates are taken into consideration.
  • Alternative minimum tax burden is relieved: “This is especially important for New Jersey residents,” Kristiansen said. “In the past, losing itemized deductions would cause a lot of people to fall into the AMT trap. In states with a high income tax rate, people were paying a lot of income tax and losing the benefit of the deduction. Now fewer people will be subject to AMT.”

Brian Kristiansen, partner, Friedman LLP.

Fellon advised that all tax laws, and especially those set forth by this year’s massive reforms, must be evaluated on a case-by-case basis.

“We have to put pencil to paper and do the work to figure out the true impact and discover the best way to offset losses and maximize gains for individuals and businesses alike,” he said.

To learn how these laws can work for you, don’t wait, Fellon advised. “People must now evaluate their position by talking with advisors who can review the circumstances and determine appropriate follow-through.”

The bottom line, said Kristiansen, is “shrewd advisors and accountants can find the pieces of reform that can benefit every resident in New Jersey.”