The Obama-Trump Boom Continues: Economy
The National Bureau of Economic Research has recorded 35 expansions since 1984 ranging in duration from 10 months to 120. The Obama-Trump expansion is now 116 months old, closing in on the all-time record of 120 months, which is held by the Clinton boom of 1992-2001.
Unemployment, at 4.1%, has not been that low for 17 years. The consumer confidence index increased in February to 131.4, following three months of decline (in 1985, the index was at 100).
While it is not yet June and anything can happen, it’s a good bet that the Obama-Trump expansion will exceed 120 months and go down as the longest in American history.
Estate Tax Portability Rules: Estate Planning
When a spouse passes, the surviving spouse has the ability to claim the used portion of their spouse’s federal estate tax exemption and add it to their own exemption. To transfer the unused portion, an election is made termed as a “portability election”. The portability election must be made on a timely basis by filing a federal estate tax return known as the “United States Estate Tax Return” also known as Form 706. The filing of Form 706 is due on or before nine months after the deceased spouse’s date of passing. An automatic six-month extension to file Form 706 may be requested by filing Form 4768 on or before the due date of the estate tax return. The portability election first went into effect for the estates of individuals that passed on or after January 1, 2011.
3 Lost Tax Deductions: Tax Planning
The Tax Cut and Jobs Act (TCJA) passed in December 2017, made significant changes to the individual income tax. As 2018 is the first year it is taking effect, you may be surprised to learn about two popular deductions that have changed for your 2018 returns:
1. Charitable Contributions:
Charitable contributions were not removed by the new tax law, however, fewer Americans will be able to take advantage of them in 2018. In order to deduct charitable contributions, you need to itemize your deductions. With the standard deduction almost doubling to $24,000 for married taxpayers filing jointly, fewer taxpayers will itemize. This change makes direct charitable contributions from your IRA more attractive for many.
2. Mortgage Interest Deduction:
Prior to 2018, you could deduct interest paid on up to the first $1 million of a mortgage used to “acquire or substantially improve your home”. Also, you could deduct interest paid on the first $100,000 of mortgage used for any purpose, known as “home equity indebtedness”. Starting in the tax year 2018, you can no longer deduct home equity indebtedness. Also, new mortgages issued December 15, 2017, now have a cap on the interest deduction for interest paid on the first $750,000 of debt.
3. State and Local Deduction (aka salt)
Many states charge income tax (although Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington & Wyoming do not). We can deduct our state and local income taxes from our federal return. However, in 2018 filers are capped at $10,000 per year for state and local income, property, and sales taxes. This salt deduction limit hits those in high income tax states the hardest; New York, New Jersey, California, Massachusetts and Connecticut.