INTRODUCTION
TAX VOLATILITY CAN UNCOVER FINANCIAL PLANNING OPPORTUNITIES
BRIAN VNAK
Vice President, Advisory Services
For more than three decades, the American tax system remained relatively stable. Every few years, tax bills would pass that would primarily impact individuals in the top tax bracket and have little impact on most Americans. However, when the Tax Cuts and Jobs Act (TCJA) passed in 2017, we entered a period of tax volatility that could continue into the foreseeable future—that isn’t necessarily a bad thing, as long as you have a plan. Since 2017, Americans—and their tax preparers and financial planners—have felt the impact of several rounds of tax-law changes, including:
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Tax Cuts and Jobs Act The new law enacted sweeping reforms and impacted all taxpayers: individuals and families, businesses, trusts, non-profits and even state departments of revenue. The potential for an automatic reversal of many individual tax law changes in 2025, coupled with possible political shifts every two years, set the stage for continued tax volatility for years to come.
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State-Level Tax Reform Another major impact of the TCJA is its effect on state income tax laws. Since most states incorporate portions of the Internal Revenue Code (IRC) into their own tax laws, the TCJA also had implications at the state level. However, the implications vary from state to state, which left taxpayers with a lot of questions. In response to the TCJA, states began proposing or enacting legislation, adopting regulations and issuing guidance on the impact of various provisions of the TCJA.
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SECURE Act The Setting Every Community Up for Retirement Enhancement (SECURE) Act is the largest retirement-focused legislation in decades, impacting individual investors and the retirement plans they may have access to through employers. The SECURE Act also contains several smaller tax changes that are not retirement related. The bill is so far-reaching that everyone should review their financial plan to identify potential opportunities or landmines.
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Coronavirus-Related Stimulus With the passing of the Coronavirus Aid, Relief, and Economic Security (CARES) Act, Congress reached a landmark agreement that provided more than $2 trillion in economic stimulus to individuals and businesses, including an individual tax rebate in the form of a cash payment. Additionally, the IRS postponed the 2020 federal income tax filing and payments deadline from April 15, 2020 to July 15, 2020 and many states followed suit. In addition, the CARES Act includes provisions that may not be as well known, so it’s important to familiarize yourself with all the nuances of this legislation.
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