What High Earners Should Know About The Tax Cuts And Jobs Act

Jan. 09, 2018 12:49 PM ET1 Comment
Chris Jaccard, CFA profile picture
Chris Jaccard, CFA

By Ellen Li, MSBA, CFP

Understanding the implications of the 2017 Tax Cuts and Jobs Act is important for any high earner, or high earning family, who wants to maintain its financial success.

As illustrated below, the recent tax reform will modify the tax rate for high income earners. But that's just where it begins. High earners should also be aware of how the tax code will significantly impact the decisions you are making about your healthcare, business, and gifting decisions.

Table Source: "Highlights of the Final Tax Cuts and Jobs Act, " by Tim Steffen, 2017 (http://www.investmentnews.com/assets/docs/CI1136191218.PDF)

Payroll Tax- the new tax code will change the way that high income earners are taxed.

  • There are seven new income tax brackets now (see above). This could mean you might need to adjust your withholdings by filing a new W-4 form.
  • The new brackets are lower for the majority of tax payers, but with certain common itemized deductions limited or eliminated going forward, you may end up paying more taxes as a result. Review your recent returns and speak to your tax advisor to plan for estimated tax payments.
  • If you are high income earners and decided not to get married to avoid paying the "marriage penalty" of two high-income individuals paying more in taxes as a married couple you may want to take advantage of the relief offered by this new law. Ask your tax advisor.

Healthcare- financial success doesn't mean immunity from the pains that high healthcare expenses can bring.

For the 2017 and 2018 tax year, you can deduct out-of-pocket medical expenses that exceed 7.5% of your adjusted gross income, which is down from the current 10 percent. Starting 2019, the deduction floor is reversed back to 10%. It may make sense to accelerate any major medical expenses so that they occur in

This article was written by

Chris Jaccard, CFA profile picture
I’m pleased to have spent my entire professional career with independent financial advisory firms where our interests are aligned with those of our clients. Since 1998, I have helped clients with a range of matters, from personal budgeting to sophisticated investment and tax planning. In addition to advising individuals and families as part of our financial planning team at Financial Alternatives, Inc., I oversee trading and operations. I also guide firm-wide investment policy alongside Jim Freeman, CFP®. Certifications: Chartered Financial Analyst (CFA); CERTIFIED FINANCIAL PLANNER™ Specialties: Integrated Wealth Management; Investment Management; Financial Planning; Asset Protection; Life, Tax, and Estate Planning.

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