ÐÔÊÀ½ç´«Ã½

Back in December of 2017, Congress passed the Tax Cuts and Jobs Act (TCJA), the most sweeping tax legislation in decades. This overhaul in federal tax law shifted many incentives and limits that may still affect your overall tax bill. And even though the law has been in place for a few years now, someÌýof the changes that were made are set to expire after 2025, so consider moving quickly to take advantage of the closing window.

Here are some strategies you might want to factor into your planning:

Recheck the numbers on a Roth IRA conversion

If you hold assets in a traditional IRA, you may want to consider evaluating the impact of converting some or all of your IRA to a Roth IRA under the lower tax rates that currently apply for many individuals. This strategy may be beneficial given that withdrawals from a Roth IRA are tax-free as long as the account owner is at least 59½ and has held the account for at least five years. Roth IRAs also provide the ability to pass assets to heirs tax-free.

Note that you’ll pay taxes on the conversion now, and it’s generally a better strategy to pay that bill with other liquid assets rather than funds from the IRA itself. Until 2018, investors were able to undo a Roth conversion in a process called recharacterization. However, under the new law, recharacterization of Roth conversions are no longer allowed. This change is permanent and will not expire after 2025.

Now that income tax rates are lower and the standard deduction has doubled, Roth conversions may still make sense for many individuals. However, it’s critically important to double-check the numbers—and consult your financial professional—before you take this now-irreversible step.

Reconsider itemizing

Taxpayers who used to itemize their deductions may no longer need to worry about their tax-deductible expenses, given that the standard deduction has nearly doubled, to $12,950 for single filers and $25,900 for married couples filing jointly (2022 amounts). Track your expenses closely this year to see if itemizing will still be advantageous and adjust accordingly going forward. For the majority of taxpayers, particularly retirees, the standard deduction will likely make sense.

Pay off mortgage debt

The TCJA puts a new cap on how much of your mortgage interest payments you can claim as a deduction on your federal taxes. For mortgages taken out after December 15, 2017, you can deduct the interest on only the first $750,000 of mortgage debt. Furthermore, interest on some home equity loans will no longer be deductible. (One major exception: The interest on home equity loans taken out to improve your primary residence can still be deducted.) Given these new limits, certain wealthy homeowners may find it more advantageous to pay off their mortgages.

Bunch medical expenses

The TCJA has lowered the threshold for qualified medical expense deductions. If your medical expenses exceed 7.5 percent of your adjusted gross income, you can claim them as a deduction if itemizing deductions still makes sense for your tax situation.Ìý

Adjust your giving strategy

As a result of the higher standard deduction, fewer people are now itemizing, which means that charitable contributions may no longer provide the tax benefit they once did. However, other new provisions provide incentives for giving: If you are 70½ or older, you may directly transfer and exclude from income up to $100,000 per year from your traditional IRA to a charity in a qualified charitable distribution. And while there is still a federal estate tax (and a state estate tax in some states), the federal exemption has dramatically increased. As of November 2022, these changes are slated to revert back to pre-2018 numbers in 2026. Talk to your tax professional about taking advantage of this limited window of opportunity that may allow you to reduce your taxable income and taxable estate by making larger tax-free gifts.

Changes in tax law can affect your personal finances in complex ways. Consult your tax and financial professionals to make a plan that is appropriate for your situation.