by Carolyn Rothwell on April 12, 2018

How Will the Tax Reform Affect my Tax Return? Answer Clients' Questions with TOTAL


Next week's tax filing deadline marks the last year of filing under the prior tax rules. With the 2017 tax returns filed or nearly filed, it's time to move away from the previous laws and focus on the impact the tax reform changes. The tax rule changes add a valuable discussion point when creating new or updating existing financial plans for your clients and prospects. Clients will be universally interested in understanding how the new tax law impacts their financial situation. Below are highlights of the tax rule changes which pertain to common tax situations. 



TOTAL, Money Tree's in-depth financial planning software, completes a detailed tax calculation proving an ideal platform for evaluating the effects of the tax law changes.  Learn about demonstrating the impact of the tax law changes using TOTAL. 


Dependent ChildrenCaring for Dependent Children:

The elimination of personal exemptions impacts all taxpayers, and especially families with dependent children.  However, more families will be able to claim the increased child tax credit.  Large families with high income may face higher taxes. 

  • $4,150 personal exemption eliminated 
  • Child Tax Credit doubled to $2,000 per qualified child 
  • Child Tax Credit phase-out increased significantly, making it fully available for joint filers with AGI under $400,000
  • 529 plans can be used to pay up to $10,000/yr per student for k-12 school expenses

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ClaimingIDClaiming Itemized Deductions:

The standard deduction nearly doubled, eliminating the benefit of claiming itemized deductions for many moderate-income taxpayers.  High-income taxpayers, especially those living in high-tax areas may face a higher tax bill due to the $10,000 cap on state and local tax (SALT) deductions. 

  • The standard deduction increased to $24,000 for joint filers
  • New $10,000 cap on SALT deductions for all filers
  • Medical expenses exceeding 7.5% of AGI can be deducted in 2018 (reverting back to 10% of AGI after 2018)
  • Miscellaneous itemized deductions are eliminated, including tax preparation fees and investment management fees
  • Itemized deductions are no longer subject to phase-out with the elimination of the Pease provision

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HomeLoansTaking Out Mortgages / New or Existing HELOC:

For clients who itemize, mortgage interest remains deductible, however, the rules have changed for loans opened after December 15, 2017.  Rules applying to new and existing home equity debt has also changed, making the interest deductible only when the loan is used to improve the home that secures the loan.  

  • Interest on the first $750,000 of qualified residence loans can be deducted, down from the prior level of $1M for joint filers
  • Interest on new or existing HELOCs or other home equity debt vehicles used for any purpose other than improving the residence that secures the loan is no longer deductible
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PayingAMTPaying AMT:

Fewer clients will face AMT due to increased exemption amounts and phaseout thresholds. Larger standard deductions combined with new limits on itemized deductions also make clients less likely to face AMT.

  • AMT exemption amount increased to $109,400 for joint filers 
  • The phaseout thresholds increased to $1,000,000 for joint filers

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BusinessOwnersOwning a Business:

Business owners, or those thinking about becoming business owners, will be especially interested in the new deduction for up to 20% of the qualified business income from flow-through entities. 

  • 20% of qualified business income may be deductible
  • The deduction for service-related businesses are subject to phase-out

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ConsideringDivorceConsidering Divorce:

This change will not come into play until 2019, but clients in divorce proceedings or considering divorce should be aware of the tax rule change.  For divorces executed after December 31, 2018, the taxation of alimony has been reversed, making alimony paid taxable rather than deductible to the payor.  The old rules apply to clients who are already divorced or will be divorced before the end of 2018. 

  • Alimony will no longer be deductible by the payor
  • Alimony will no longer be taxable income for the recipient 

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Carolyn Rothwell

Carolyn enjoys spending her time building Money Tree Software's brand and products. Her experience creating and delivering financial plans for a full-service financial planning firm and supporting advisors working to provide the best planning to their clients as a Money Tree support member has provided an excellent understanding of the importance of financial planning.