• 2018 Year-End Tax Planning Guide
  • December 1, 2018
  • Law Firm: Duane Morris LLP - Philadelphia Office
  • It has been almost a year since passage of the most sweeping tax legislation, known as the Tax Cuts and Jobs Act (“TCJA”), in more than 30 years. This legislation represented the most comprehensive change to the tax code in a generation and greatly modified the income, estate, gift and generation-skipping taxes for individuals, businesses, estates and trusts. While this new tax code is complex and guidance and interpretation continue to evolve, there is still time to position yourself to take advantage of the opportunities presented by tax reform, including identification and execution, before year-end to reduce your 2018 tax liability. Our annual Tax Planning Guide herein is designed to highlight select tax provisions and potential planning opportunities to consider for 2018, and in some cases, 2019.

    Prior to the midterm elections, a new 10 percent middle-income tax cut was expected to be advanced in 2019, which could have affected tax planning for 2018. However, with the Democrats gaining control of the U.S. House of Representatives in the election last month, bipartisan agreement on future tax cuts seems unlikely. Republicans would have needed to retain control of both chambers of Congress for any predictable chance of approving further individual tax cuts or making permanent those enacted under the TCJA.

    Separately, the House approved its “Tax Reform 2.0” package in September 2018, which includes measures to enhance various savings accounts and business innovation opportunities, while making permanent the TCJA’s individual tax cuts, many of which were set to expire within seven years. The Senate has showed little interest in taking up the package as a whole before the end of the year, though consideration of the retirement and savings measure in the lame-duck session still remains a possibility.

    In late November 2018, House Ways and Means Committee Chairman Kevin Brady (R-TX) released a 297-page tax bill that includes a number of technical corrections to the 2017 TCJA and more than 30 “tax extender” provisions dealing with expired or expiring tax provisions as well as tax provisions related to disaster relief, retirement issues, and innovation incentives for start-up businesses. While the House is expected to pass the Brady tax package, likely along party lines, we feel its chances of success “as is” in the Senate are doubtful.

    Thus, separate and apart from the Treasury’s continuing issuance of regulatory guidance and technical changes to correct identified errors in the TCJA, we anticipate limited legislative changes on the horizon, especially as the congressional calendar provides limited opportunities for new tax legislation. Furthermore, with the upcoming focus on the 2020 election, we expect more gridlock than tax code progress.

    As a result and due to the volatile nature of the stock market, economy, and tax environments, we recommend the prudent approach of planning now, based on current law, and revising those plans as the need arises. So, please check in with us and keep a watchful eye on our tax Alerts, which are published throughout the year and contain information on tax developments that are designed to keep you informed of significant changes in those environments.

    In this 2018 Year-End Tax Planning Guide prepared by the Tax Accounting Group (TAG) of Duane Morris, we walk you through the steps needed to assess your personal and business tax situation in light of the new law and identify actions needed before year-end to reduce your 2018 tax liability.