2019 Year-End Tax Guide

THE MARCUM 2019 YEAR-END TAX GUIDE | www.marcumllp.com

2019 YEAR-END TAX PLANNING STRATEGIES FOR INDIVIDUALS

Two years ago, the Tax Cuts and Jobs Act (TCJA) was signed into law. Changes included tax rate reductions for most individuals, a new deduction for owners of sole proprietorships and pass- through entities, an increased standard deduction, an increase in child credits, a significant increase in the Alternative

n Consider gifting appreciated stock or mutual fund shares to relatives in a lower income tax bracket (such as children or grandchildren), who will pay less or no tax on the long term capital gains when the shares are sold. n Consider selling unrealized loss positions in your investment portfolio to offset capital gains recognized earlier in the year. II.) NET INVESTMENT INCOME TAX (NIIT) In addition to income tax, individual taxpayers with modified adjusted gross income (MAGI) of more than $200,000 per year ($250,000 if married filing joint; $125,000 if married filing separately) may be subject to net investment income tax. NIIT equals 3.8% of the lesser of (a) net investment income or (b) the amount by which MAGI exceeds the applicable threshold. Net investment income includes interest, dividends, capital gains, rental income (unless derived from ordinary business activities) and passive activities, less deductions properly allocated to net investment income. Planning Opportunities: n Consider electing installment sale treatment so that gains are spread over a number of years. By spreading the income over multiple years, current year net investment income and MAGI may be reduced to minimize or eliminate the 3.8% tax for the current and future tax years. n Consider selling unrealized loss positions in your investment portfolio to offset capital gains recognized earlier in the year. n Tax exempt income is not subject to the 3.8% tax. Consider switching investments to tax exempt investments if it makes sense for your portfolio. State taxation of such investments should also be considered.

Minimum Tax (AMT) exemption, and limitations or elimination of many other tax deductions. The IRS continues to release guidance and update tax forms to reflect changes enacted in the TCJA. With one full year of TCJA filing behind us and the second year fast approaching, below is a summary of some significant planning opportunities to minimize individual tax obligations. I.) CAPITAL GAINS Income from an investment held for more than one year is generally taxed at preferential capital gains rates. For 2019, the long-term capital gain and qualified dividend rates remain unchanged at 0%, 15% or 20%, based on statutory income brackets and adjusted for inflation. For example, the 20% rate applies when taxable income exceeds $488,850 (married filing joint), $461,700 (head of household) or $434,550 (others). Planning Opportunities: n Consider holding capital assets for at least 12 months, as short-term capital gains are taxed at ordinary income rates.

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