The Tax Cuts and Jobs Act (TCJA) has become a reality. What are the opportunities for your clients?
If you’re like me, you’re still poring over the TCJA, considering the many ways your clients may be affected. But in case you haven’t had time to read all 1,097 pages of the Act and accompanying conference report, or if you’d just like to compare notes, here are my thoughts on the top tax opportunities facing your clients.
2017 tax filing
Before looking ahead, your clients must face the present. An unbridled bull market may never look less appealing than at tax time. This year, your clients may be missing the tax loss harvesting they’ve enjoyed from past bear markets. Your retired clients may be feeling the impact of capital gains taxes. And these tax impacts may make clients hesitate to perform the portfolio rebalancing that’s so necessary after a runaway bull market.
Your action step: Take this opportunity to discuss smart tax strategies like deferral and diversification that may help them minimize some of the impact this time next year.
2018 tax outlook
As clients consider what the next tax code will bring in 2018 and beyond, I would hazard a guess at what they’re thinking: “Will I pay more or less?” In some cases, the answer may be more, due to higher personal income tax brackets and the elimination or reduction of certain personal exemptions, such as for state and local taxes (known as SALT), home equity debt, advisory and tax preparation fees, and moving expenses.
Those clients may need strategies to help lower their adjusted gross income (AGI) and mitigate the effect. By contrast, clients who may see a bit more wiggle room in their budgets due to lowered personal income tax rates may want to consider the opportunity to invest in their retirement income security.
Your action step: Help clients facing higher taxes consider how they may reduce their AGI with pretax contributions to a retirement income solution. For those clients looking at potentially reduced tax bills, remind them it may be valuable to put those “extra” dollars toward their future retirement income plan – and that due to the way the TCJA is written, 53% of taxpayers are slated to see their taxes increase by 2027.1 With that in mind, a diversified tax strategy that incorporates tax-efficient distribution, as described in this client guide, may make sense.
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To learn more about helping your clients find tax-efficient retirement income strategies, contact your Lincoln representative today at 877-533-0265. And follow us on LinkedIn and Twitter for regular insights and tips on retirement income planning conversations.
Lincoln Financial Group® affiliates, their distributors, and their respective employees, representatives, and/or insurance agents do not provide tax, accounting, or legal advice. Please consult an independent advisor as to any tax, accounting, or legal statements made herein.
1Tax Policy Center, Urban Institute and Brookings Institution, http://www.taxpolicycenter.org/feature/analysis-tax-cuts-and-jobs-act.
ABOUT THE AUTHOR
For more than 22 years, Christopher H. Price, JD, LLM, CLU®, ChFC®, AVP, Advanced Sales, Lincoln Financial Distributors, has helped advisors and their clients accumulate, distribute and transfer annuity assets by using a holistic approach. In 1983, he began his career as a trust officer with Sovran Bank (now Bank of America). Chris moved into financial planning, and followed that by managing an insurance agency that served some of the wealthiest families in the country. In 1994, Chris joined Delaware Investments, formerly a member of Lincoln Financial Group, where he was responsible for the product management of Delaware mutual funds and eventually Lincoln variable annuities. From 2000 to 2004, Chris used his expertise to help financial advisors and their clients with advanced case issues. In 2005, he transitioned to the Lincoln Advanced Sales team. Chris holds a BA in history from Vassar College, and law and master’s degrees from the Marshall-Wythe School of Law at the College of William & Mary.