The Tax Cut and Jobs Act (TCJA): A Personal Story

Earlier this year, I wrote how the TCJA passed by Congress last December would be a vexing problem for tax planning. I also highlighted some issues that everyone should be concerned about.

As a New Yorker, I always estimated that my total taxes would increase from year to year, primarily because of the cap on the deduction for state and local taxes (SALT). In that blog, I also suggested speaking to your tax advisor and getting a “pro forma” analysis using last year’s numbers.

When my clients asked me what to expect, I told them that I expected their tax burden to be higher, but not as much as they feared from press reports as items like the rise in alternative minimum tax (AMT) limits would offset the change in SALT deductibility.

As I noted in the January blog, I thought the change in SALT and mortgage interest deductibility would depress home values in my area because the net monthly outlay to own would likely increase in comparison to renting. Whether or not this is the reason, most real estate agents will tell you that the local market for homes has softened significantly where I live.

My wife and I have been renters in New York forever but always had an eye on buying a home in the city. However, we always were concerned about cash flow. Being “house poor” in order to make it happen is not an option for us. Therefore, we never found the place that was worth the value and increased monthly cash outlay.

As we consider the market approaching our range, I spoke with our tax advisor to get a better understanding of what our real affordability would be given the new regime. Here’s what was suggested to me about our tax situation:

  • My tax liability for 2018 will likely go down from 2017. I will be less likely to be itemizing as SALT limits will take that option off the table so long as I am a renter.

  • The $2000 child tax credit (which is in some cases refundable, according to my tax advisor) is a significant factor.

  • The higher AMT limits mean that I will no longer be paying AMT.

  • I have paid estimates for the first three quarters of 2018. Paying them for the fourth quarter is likely unnecessary and I may still receive a significant refund.

Obviously, I have not included personal information here. And your personal situation WILL vary so you should check with your tax advisor on your numbers, but it seems as if concerns about higher tax burdens being faced by those in our area among middle- to upper-middle-income families may be overblown. And I hope that the real estate market keeps correcting so that we can find our long-term home.

Russell D. Rivera, CFA®, CFP®, is the Founder and President of Voice Wealth Management (Voice). He considers himself as a Personal CFO and Financial “Therapist” for entrepreneurs, young professionals, and their families. He helps clients make prudent financial decisions regarding spending, saving, investing, and planning while giving a voice to the individual client's financial priorities and experiences. Get in touch with Russell at 646-630-0980 and