There’s been a great deal of conversation regarding the recent changes in U.S. tax laws.  We’ll focus only on the facts.  This is not tax advice.  Full Circle Financial of Colorado and Cambridge Investment Research do not provide tax or legal advice.  I encourage you to talk with a tax professional regarding your specific situation.

On December 22, 2017 President Trump signed the Tax Cuts and Jobs Act.  Most notably, the corporate tax rate went from 35% to 21%, the top individual tax rate was reduced to 37%, and the standard deductions were doubled.  The corporate cuts are permanent but the individual changes will expire at the end of 2025.

Tax Law Highlights:

The new tax law doubles the standard deduction from $6350 to $12,000.

The deduction for married and joint filers increases from $12,700 to $24,000.

Personal exemptions have been eliminated and regardless of the reduction in the rate, there will be some people that pay more in net taxes.

Most itemized deductions have been eliminated.

State and Local Tax (SALT) deductions have been capped at $10,000.

The Alternative Minimum Tax (AMT) still exists but the exemptions have increased.

The Act raised the standard deduction for pass-through businesses to 20%.  This includes sole proprietorships, partnerships, LLC’s, and S Corporations.  There is a loophole that many high earners may be able to take advantage of if they so choose.  Traditionally, cooperatives have been known to create and distribute electricity in rural areas and similar operations.  This has generally not been the purview of high-earner families as a primary source of income generation.  Via the cooperative, the members are paid “patronage dividends” that are passed through and deductible to the cooperative.  Since there are deductions that can be taken within the cooperative the result may be taking its members from what would have been a 37% tax rate to an effective 29.6% tax rate.

The new tax law doubles these exemptions. Now, for 2018, individuals get a $11.2 million lifetime exemption and married couples get to exclude $22.4 million. That should leave few families paying the estate tax.

Again, it’s important to consult your tax professional for your specific circumstances. This is not specific tax advice.  As your fiduciary, we work closely with tax professionals to promote the best outcome for you, our mutual client.


So, what does this all mean to you, the investor?

I read a story of a reporter who interviewed the late Justice Brandeis.  The reporter inquired as to the difference between tax evasion and tax avoidance.  As the story goes, Justice Brandeis looked out the window and pointed to two bridges across the river.  The first bridge was a direct route to his home but required a five cent toll.  The second bridge was slightly out of the way for him to get home but it was paid for with taxpayer dollars and was free to cross.  Justice Brandeis quipped that both bridges could be crossed, one for free, the other for five cents.  Driving through the toll without paying is tax evasion and should be punished; driving across the other bridge is simply tax avoidance.

The purpose in telling you that story is simply to let you know we have many “bridges” that we can use to help you achieve your goals.  Finding which “bridge”/investment(s) to use requires expertise to determine suitability and a relationship with commitment helping you reach your goals.

At Full Circle Financial of Colorado, we use our ® process to work with all clients.

What is U³ ®

Understand.  Without first understanding your unique circumstances, your objectives, your challenges we are hard pressed to make suitable recommendations uniquely tailored for you.  Our team has helped people with 529 Plans, IRA’s, 401K rollovers, Simple IRA’s, retirement investment accounts, and Solo K’s to name a few.  With the passage of sweeping changes in the 2018 Tax Overhaul comes uncertainty for many.  What may have made perfect financial sense in the past may need to be altered as we move forward together.  Understanding you, your goals, your ambitions, your desires, your tolerance for risk, and how you define success is paramount to the process.

Utilize:  Our relationship with Cambridge Investment Research gives us access to a state-of-the-art Independent Broker Dealer.  The platforms available and the experience at our fingertips allow for the purchase of institutional share classes with highly attractive expense ratios helping us maximize potential returns.  There are no guarantees when investing but there exists the expectation of using some of the best data available in making informed decisions.

Be understood:  We put on our shoes in the morning just like you.  If you ask us the time, we’ll tell you the time.  If you want to know how the watch is built, we’ll do that too.  It’s important to know that the person you’re relying upon is capable of both telling you the time and explaining how the watch is built.  We make it a priority to communicate regularly with our clients regarding their concerns and our concerns within the market.  Also, you can rest assured that you’ll have regular conversations regarding performance, your goals, and any changes in your aspirations.  A regular feedback loop is established with all clients and is tailored to what is important to them.

To be most helpful to you, we need to meet you where you are, make you our number one priority, listen carefully, research fully, deliver consistently on our promise and, as they say, rinse and repeat.  You need to know that, outside of someone with your same last name, we care as much, or more, for your financial well-being.

If this sounds like a conversation you’d like to continue, please let me know by clicking on this link to schedule a follow-up conversation.  I look forward to talking with you!

Advisory services offered through Cambridge Investment Research Advisors, Inc., a Registered Investment Adviser. Cambridge and Full Circle Financial of Colorado, Inc. are not affiliated.

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