In a live WGN Chicago interview, tax attorney and financial advisor Mark J. Kohler explains how the 2018 Tax Cuts and Jobs Act will affect everyday taxpayers. He notes that most W‑2 earners will see an immediate increase of $50‑$300 per paycheck, with annual savings ranging from $1,000 to $5‑$6,000 for the typical American. Kohler advises viewers to use online calculators (e.g., New York Times) to estimate personal savings. He highlights the new $10,000 cap on state and local property tax deductions, urging taxpayers—especially in high‑tax states—to pre‑pay deductible expenses before year‑end. He warns that the ability to recharacterize Roth conversions has been eliminated, so anyone considering an IRA‑to‑Roth conversion must decide by the end of the year. Small‑business owners can benefit from a new 20 % deduction on qualified business income, potentially freeing cash for hiring and equipment. Parents are reminded of the expanded child tax credit and childcare credit, which serve as incentives for having children. Throughout, Kohler stresses using the anticipated tax savings productively rather than increasing debt.
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So this morning we are breaking down the new tax plan, how it is going to affect your paycheck and when those changes will start taking place.
Yes.
And Mark Kohler is a tax attorney and financial advisor. He joins us live now via Skype. Good morning.
Hey, good morning. Thanks so much. And I feel bad. I've got this fireplace behind me. Feel bad.
You're showing off. That's okay.
We'll make it work.
So I guess first and foremost, Mark, how is this going to affect people going forward into next year?
Well, people should see an immediate change in their paychecks. We're looking at all the W2 wage earners out there. Probably somewhere between 50 to $300 in your paycheck itself could change here right away.
Specifically, who's going to see those changes? Or is it going to be, I mean, is it most Americans? A lot of Americans?
Well, it is most Americans. And what a lot of people we're encouraging our clients to do is get to some of these excellent calculators out on the website. New York Times has a good one where you can kind of figure where you normally fall and see where your savings might be. And for most Americans, it could be anywhere from a thousand to maybe five, six thousand dollars annually in savings.
Okay, so what are the, some of the key factors? Because I was, I was going through some of these calculators with the New York Times and a lot of, you know, financial, financial analysts say that there's so many different factors that are going to figure into how much you're going to save. So what are some of the key factors, though, that could at least help you get an idea?
Well, you want to, of course, just make sure you're putting in your criteria, married, single, kids or not, what state you're in is going to be a factor. And here's the bottom line. I would say 80% of Americans are going to see savings. What you should be thinking about is what are you going to do with that savings? Are you going to just go out and spend it and add to your own debt like the government? Or you're going to maybe use some of these wonderful retirement strategies that were saved in the bill that didn't change. Let's use that savings and use it productively, hopefully.
I was wondering about the property tax deduction. They're putting the cap on the property tax deduction. A lot of people wondering if they should try to prepay the property taxes, if possible, before the new year.
Absolutely. If you're one of these blue states, of course, Illinois, there You've got to really think about prepaying for those that can afford to do it, prepay any expenses before year end. And these are these itemized deductions that you won't be able to take as much advantage of next year. Prepaying state tax, maybe some charity. For example, if married couple making 260,000 a year, maybe it's going to give $1,000 to charity in the next few weeks or months. You'd be better off giving it now rather than after January 1st because your tax rates will go down. You might see an extra tax savings of $75 to $100 by doing it earlier rather than later.
So getting back to your paychecks, tell us again when you expect to see that difference. Is it going to be the first check that you get in January or is it going to take a month or two to kick in?
Well, we're all hoping the IRS is rushing to get new payroll tables and regulations out to all the business owners and payroll companies. So we should see at least by your second paycheck, you'll start seeing a little difference or increase there.
And so someone that's retiring, what should they do to prepare for these changes?
Well, really one of the big changes for those that are investing with their retirement accounts is the Roth strategy, which is an incredible tax saving strategy. Usually before December 31, you can say, oh, I'm going to characterize part of my IRA as a Roth. And then you had until your tax return to change your mind on a portion of it or all of it. That's called a Roth re characterization. Well, that's gone now. So in the next five days, you've got to decide how much do I want to convert to Roth money and then live with it. But the retirement planning options are all there, the 401k still intact. And I think a lot of small business owners are going to see a big benefit too, is they turn the corner into the new year.
Yeah, Mark, I was just going to ask you about small business owners. Anything that they need to keep in mind here starting in January.
Hey, I think this has really been a big win for the small business owners. I was really worried about Main street early on. The House Bill was more worried about corporate America than us Main street business owners. So what it is, it's a unique equation. But basically you get a deduction of 20% off the bottom line of the profit of your business. This is going to allow a lot of small business owners to change their quarterly deposits, put more money in their bank account to hire employees and buy more equipment. I think it's a great thing for Main Street.
So if you're a parent with a child, what, what should you look for in terms of, you know, the tax deductions and going forward again?
Well, you bet. Apparently in this country, we are encouraging procreation. So if you've thought about having a child, this is the year to do it. You get a double deduction, the child tax credit, for. For having children. And it's expensive to have children. This has been a concern of our legislators is how do we pay for college. And when we have children, the childcare tax credit is still very viable and a good thing. So we're trying to help those parents out there that are adding to our population. So it's a good thing in the bill, I guess. Yeah.
All right. Mark Kohler, financial advisor. Really appreciate your time and advice this morning.
Hey, thanks so much for having me.
And he's got his website right there on our screen. We'll talk to you soon.
