While the Tax Cuts and Jobs Act of 2017 brings many changes that affect both individuals and businesses, it didn’t alter the need for life insurance, which continues to be a cornerstone of financial planning. In fact, the law may have enhanced the benefits of having life insurance.
Yet, according to LIMRA’s “Facts About Life” report, only 54 percent of Americans have any type of life insurance. And nearly one in three Americans believe they need more life insurance, according to the 2017 study.
In the following video, Prudential Vice President of Individual Life Insurance Jill Perlin breaks down how the tax reform act may affect your taxes now and in the future:
Since income tax rates are lower starting this year, what should I do now?
It’s important to finish filing your 2017 taxes first. Once you understand your 2017 tax obligation, you’re in a better position to plan for 2018. Depending on where you fall in the new income tax brackets, you may want to consider ways to lower your taxable income. One way to do this is by increasing your pre-tax contributions to your company retirement plan.
With the lower tax rates, should I adjust my income tax withholding?
The act did modify the marginal rates for individual income taxation. The revised income tax rates will be in effect from 2018 through 2025, unless changes are made before January 1, 2026. You should review your income tax withholding to make sure you don’t have too much or not enough withheld.
How does the Tax Cuts and Jobs Act affect my investments?
That depends on what you’re invested in. Tax diversification is always important, so it’s a good idea to talk to your financial advisor about the overall tax efficiency of your portfolio.
Does the act affect how I save for my children’s college?
Yes. The act includes an expansion of 529 savings plans that allows families to save for K through 12 expenses, in addition to college expenses. 529 plans will also be able to be used for qualified distributions for elementary and secondary school expenses up to $10,000 per year per student. So you will want to review your existing college savings plans to determine if changes might be appropriate.
Can I increase my charitable contributions?
The act enhanced the deduction for charitable contributions by raising the limit that can be contributed in any one year. That limit is now 60 percent of adjusted gross income up from 50 percent. If you can still itemize, you can continue to deduct charitable contributions, but it only reduces your taxes if all of your itemized deductions exceed the newly raised standard deduction. Some taxpayers who have lost the value of some deductions such as state and local taxes may make up the difference by contributing more to their favorite charity so they can continue itemizing.
For media interested in speaking with Jill Perlin about the Tax Cuts and Jobs Act or Individual Life Insurance, please contact Lisa Magnino.