Impress your clients and prospects with a discussion on the Tax Cut and Jobs Act (TCJA) Ted Denbow VP, Head of Sales

Agenda Brief overview of RightCapital Overview of TCJA Engage your prospects and clients with TCJA discussions Planning opportunities for clients

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Overview of TCJA

Overview of the TCJA changes New tax brackets Merging personal exemption into standard deduction Schedule A itemized deduction changes Expanded child tax credit Alternative minimum tax exposure reduced Qualified Business Income deduction Expanded 529 tax free distribution A great resource for tax changes summary: Michael Kitces’ blog post Individual Tax Planning Under The Tax Cuts And Jobs Act Of 2017

TCJA – New tax brackets For Individual For Married Couple Current Law TCJA Current Rate TCJA Rate $0 - $9,525 10% $9,525 - $38,700 15% 12% $38,700 - $93,700 $38,700 - $82,500 25% 22% $93,700 -$195,450 $82,500 - $157,500 28% 24% $195,450 - $424,950 $157,500- $200,000 33% 32% $424,950 - $426,700 $200,000 -$500,000 35% $426,700 + $500,000+ 39.6% 37.0% For Married Couple Current Law TCJA Current Rate TCJA Rate $0 - $19,050 10% $19,050 - $77,400 15% 12% $77,400 – $156,150 $77,400 – $165,000 25% 22% $156,150 -$237,950 $165,000 - $315,000 28% 24% $237,950-$424,950 $315,000 - $400,000 33% 32% $424,950 -$480,050 $400,000-$600,000 35% $480,050 + $600,000 + 39.6% 37.0% Long term capital gains and qualified dividends retain old thresholds under TCJA

TCJA – Merging exemption into standard deduction Current Law TCJA Exemption $4,050 for individuals $8,100 for married couples Removed Standard deduction $6,350 for individuals $12,700 for married couples  $12,000 for individuals $24,000 for married couples

TCJA – Schedule A itemized deduction changes Current tax law TCJA State, Local Income Tax & Property Tax No Cap Capped at $10,000 Mortgage interest deduction Capped at $1,000,000 loan Capped at $750,000 loan for loans issued after December 15th of 2017 Home equity interest** Fully deductible Only deductible for acquisition debt Charitable Contribution Capped at 50% of AGI Capped at 60% of AGI Medical expense Deductible in excess of 10% of AGI Deductible in excess of 7.5% of AGI for 2017 and 2018 Other Misc itemized deductions Deductible in excess of 2% AGI floor Not deductible Itemized deduction Phase out 3% phase out over threshold $261,500 for individuals $313,800 for married couples Completely removed ** “Home equity indebtedness” as defined under IRC Section 163(h) is no longer deductible, only ‘acquisition indebtedness’. This determination is not based on whether the loan is a “home equity loan” or “home equity line of credit” but is based on how the mortgage proceeds are used.

Lower to 7.5% for 2017 and 2018 Capped at $10,000 Capped at $750,000 loan

Increase Cap to 60% AGI Many are removed Phaseout is removed

TCJA – Expanded Child Tax Credit Current TCJA Tax credit amount $1,000 per qualified child $2,000 per qualified child Phase out $75,000 for individuals $110,000 for married couples $200,000 for individuals $400,000 for married couples

TCJA – Alternative minimum tax exposure reduced AMT Current TCJA Exemption $55,400 for individuals $86,200 for married couples  $70,300 for individuals $109,400 for married couples Phase out $123,100 for individuals $164,100 for married couples $200,000 for individuals $400,000 for married couples

TCJA – Qualified Business Income Current TCJA LLC, S Corp, Partnership Straight passthrough – all income taxable 20% below the line deduction LLC, S Corp, Partnership: Service sector Phaseout $157,500 - $207,500 for individuals $315,000 - $415,000 for married couples

Tax free distribution for college expense TCJA – 529 Plan Income Current TCJA 529 distribution Tax free distribution for college expense Tax free distribution for college expense and private elementary and secondary school expenses (up to $10,000 per year per student)

TCJA – Other changes Items TCJA Individual Mandate on health insurance Repealed effective 2019 Estate & Gift Tax Exemption amount doubled

Standard deduction increased Many changes in Schedule A Exemption removed LLC/S Corp income deduction New tax brackets AMT reduced Child credit increased

Engage your prospects and clients with TCJA discussions

How many of your clients have asked these questions? “ Am I paying more or less taxes? How does TCJA impact my long term financial goals? What happens if TCJA expires in 2025?” “

RightCapital can help TCJA RightCapital Implementation New tax brackets Capital gains and dividends Exemption Standard deduction Schedule A Alternative minimum tax Child credit Qualified business income Option to turn TCJA on and off Option to Sunset TCJA or not

Planning opportunities for clients

Case Study 1 Meet the Jackson’s John and Sarah: Married Current ages: 40/41 Target retirement age: 65/65 Salary: $75,000/ $100,000 Social Security: 67 Monthly expenses: $5,000 Invested assets: $400,000 qualified $250,000 non qualified

Identifying opportunities in tax savings What are your clients going to do with savings from TCJA? First, identify how much it is! Total tax liability – upcoming year 2017 Tax Rules TCJA Tax Rules $48,417 $41,921 Appx $6,500 savings / yr through 2025

Identifying opportunities in tax savings Saving your savings Saving additional $6,500 /yr Spending additional $6,500 /yr

Identifying opportunities in tax savings Saving your savings Proposed: additional $6,500 /yr is saved; Current: additional $6,500 /yr is spent

Case Study 2 Meet the Brady's Mike and Amanda: Married Current ages: 56/57 Target retirement age: 65/65 Salary: $150,000/ $50,000 Social Security: 70 Monthly expenses: $7,000 Invested assets: $1,500,000 qualified $100,000 non qualified

Evaluating business opportunities With the new qualified business passthrough, some have questioned the value of working as an independent contractor rather than at their current firm Salaried Employee Full income taxable Independent Contractor 20% deduction reduces taxable income Self employment tax offsets savings vs

Identifying opportunities in tax savings Tradeoff will often depend on individual circumstances In this case moving to self-employment income increases their total taxes paid

Case Study 3 Meet the Brady's Mike and Amanda: Married Current ages: 56/57 Target retirement age: 65/65 Salary: $150,000/ $50,000 Social Security: 70 Monthly expenses: $7,000 Invested assets: $ 1,500,000 qualified $ 100,000 non qualified

Sequential strategy: liquidate taxable account first and let IRA Compound Liquidate your taxable accounts first. Let retirement accounts such as IRA/401(k) accounts compound, while deferring income taxes. This approach can result in tax savings.

Using Optimization to derive a balanced approach Opportunities to convert assets under TCJA rules at relatively lower brackets / rates Don’t w/d from IRA Current tax rate Future tax rate W/d from IRA and Roth conversion Future tax rate Current tax rate Expiration of TCJA in 2025 will result in higher relative future taxes

Roth conversion opportunities Opportunity to convert assets under TCJA rules at lower brackets/rates Valuable strategies become more so under TCJA: Using 2017 Tax Rules Using TCJA w/ 2025 sunset

Take Aways Change the conversation you are having today with clients and prospects and differentiate yourself from other advisors Utilize RightCapital’s tools to make conversations with clients easy to understand and interactive Hold educational webinars/seminars incorporating client slides Schedule a demo at www.rightcapital.com for more information

Thank you!