Tax Changes Coming – What, if anything, should I do?

It continues to be a whirlwind out of Washington, DC! Two weeks ago, the United States Senate was at work passing its version of the ‘Tax Cuts and Jobs Act’.  On November 16th, the House of Representatives had done the same. Now it’s up to a small group of senators and representatives to iron out the differences in conference before a final vote is taken and the bill is sent to the President.  As we go to press it was just announced that the Senate and House Republicans have struck a deal.  And while we are not yet certain what the final version will bring, we are mindful of the possible implications of new legislation from investment and tax perspectives.  For some there may be steps that can be taken before year end to help better position themselves for the coming changes.

Jane has invested in ABC stock which is currently trading at $65 per share. Her lots of ABC stock are as follows:

Jan 8 2008 bought 10 shares of ABC for $60

May 5 2016 bought 10 shares of ABC for $85

If Jane pares her ABC stock in 2017, she can sell the May 5 2016 lot at a $20 loss/share and use the loss to offset capital gains she’s incurred elsewhere in her portfolio.  However, if Jane waits until 2018 to sell ABC stock, and the Senate’s FIFO rule is in place, she will be required to sell the Jan 8 2008 lot at a $5 per share taxable gain.

Additionally, current tax law allows interest paid on up to $1 million of combined purchase debt on a principal and secondary residence to be deductible.  Interest on up to another $100,000 of home equity debt is also currently deductible but goes away in both the House and Senate versions.  It appears that the compromise will limit the mortgage interest deduction to the first $750,000 of purchase debt for principal residences only.

While the final details of the new tax legislation remain unknown, we encourage you to consider these proposals, and potential implications, to determine whether there are any year-end tax planning opportunities you wish to discuss with your tax advisor and Madison, time permitting!


Important Note: This material is for informational purposes only and is not intended to serve as a substitute for personalized investment advice or as a recommendation or solicitation of any particular security, strategy or investment product. The material presented here has been obtained from sources believed to be reliable.  Madison cannot guarantee the accuracy or completion of this information.  Madison Wealth Management does not provide tax, legal or accounting advice. © Madison Wealth Management 2017