Within a month of the tax reform law’s passage in December 2017, 67% of CPA financial planners had discussed the effect of tax reform with their clients, and by the end of January, 56% had started making changes to their clients’ financial plans, according to survey results released Thursday by the American Institute of CPAs.
“As the most recent tax reform was being finalized, we were reviewing every client’s situation for last-minute planning opportunities and the long-term impact it would have,” David Oransky, CPA/PFS member of the AICPA personal financial planning executive committee, said in a statement.
“This allowed us to create multiple contingency plans so that when the final bill became law, all we had to do was execute the appropriate plan. This resulted not only in savings for our clients, but also served to reduce their anxiety about the changes.”
The AICPA conducted an online survey in late summer of 631 certified public accountants who are members of the organization’s personal financial planning section, including those holding the personal financial specialist credential.
CPAs’ proactive response to passage of tax reform resulted in widespread changes across several broad areas of their clients’ plans, according to the survey:
- Charitable giving – 50%
- Business structure – 49%
- Estate plan changes – 42%
- Adjustments to clients’ retirement savings – 32%
- Adjustments to their housing decisions such as home equity loan or line of credit – 27%
- Changes to investment source of clients’ retirement income – 24%
- Changes to their investment allocation – 22%
The survey found that during initial discussions about tax reform, 45% of clients reported being optimistic about how it would affect their finances, while 40% were anxious. However, at the extremes, 9% of clients were very anxious, compared with 6% who were very optimistic.
The findings showed that four in 10 clients’ anxiety was fueled mainly by the loss of tax deductions and by uncertainty about the amount of tax they would pay. Conversely, more than three-quarters were optimistic largely because of anticipated savings. The benefit from higher estate and gift tax exemptions also generated optimism for a tenth of clients.
“A personal financial plan is, above all, personal,” Andrea Millar, director of financial planning for the Association of International CPAs, said in the statement. “And while laws may change, the role of the CPA financial planner is to make sure that the plan is working for their client in any environment to support their life goals and to keep them and their family secure.”
Looking ahead to next year’s tax season, several members of the AICPA personal financial planning division offered last-minute tax planning tips. Following are three of them. The deadline for all these moves is Dec. 31.
1. Bunch Charitable Contributions
“For those individuals who are considering the standard deduction instead of itemizing, consider bunching your charitable contributions into alternate years if it will enable you to take the standard deduction one year and itemize the next. If you do not want to give the money to charity at one time, contribute to a donor-advised fund and then make the distributions to charity over time.” — Lisa Featherngill, CPA/PFS member of the AICPA PFP executive committee
2. Gift to Heirs Today to Reduce Future Estate Tax
“The year-end is a great time to make annual exclusion gifts. For those looking to reduce their estate tax exposure, individuals can give up to $15,000 to an unlimited number of beneficiaries per year without decreasing their lifetime estate tax exclusion amount or paying a gift tax. These planning opportunities will be lost once the year ends and should be top of mind to review now.” — Robert Westley, CPA/PFS member of the AICPA personal financial specialist credential committee
3. Leverage Your Losses
“Harvest your losses! It’s been a strong year for U.S. equities, but international stocks and fixed income have had negative returns for the most part. Therefore, take advantage of tax loss harvesting to offset any of the gains you’ve taken throughout the year. Bear in mind, though, that you can’t buy back the same holding you sold at a loss within 30 days or else you’ll run afoul of ‘wash sale’ rules.” — Michael Landsberg, CPA/PFS member of the AICPA PFP Executive Committee.
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