Data Entry: Tax Assumptions

Client Specific Tax Assumptions

To review and customize client specific tax assumptions, open a client plan > Select gear icon > Settings tab > Tax assumptions tab. This area allows advisors to adjust inflation assumptions, Social Security benefits, and tax settings.

Taxes

Tax Law:

Use the drop-down box to select the tax framework used in calculating the client's projections:

1. TCJA sunset 2025: reflects all updated provisions related to TCJA, including the sunsetting of most individual income tax provisions in 2025
2. TCJA no sunset: reflects all updated provisions related to TCJA for the entire duration of the plan (ignores the sunset provisions).
3. 2017 tax law: reflects all tax provisions prior to enactment of TCJA, as would be used in clients' 2017 tax calculations.

Ordinary Income Tax Rate Adjustment:

Advisors can use this setting to illustrate a higher federal income tax rate in the future. This feature is helpful for users who believe tax rates will rise in the future beyond the sunset of TCJA. This is not a blanket increase in taxes, rather it's an increase in the rate for each of the ordinary income tax brackets. This setting only effects federal income taxes, and will not impact long-term capital gain brackets.

To adjust the ordinary income tax rate in the future change the dropdown menu from "No Adjustment" to "Increase By". Users can then input the percentage that will increase ordinary income tax rates in a specific year.

Qualified dividends:

• Use this field to enter the percentage of dividends assumed to be tax-qualified.

Long term capital gain:

• This field indicates the percentage of capital gains that are assumed to be long term capital gains.

Portfolio turnover:

• Use this area to adjust the average annual turnover in taxable accounts. This value represents annual portfolio balancing and will produce capital gains in the plan.

Misc itemized deductible:

• Enter a percentage of AGI to be treated as a misc itemized deductible when applicable.

Carryover Values from Previous Years

Capital loss carryover:

• Enter the long term capital loss carryover amount that will impact the client plan. It can be seen adjusting taxes in the Tax module > Tax Estimate > Details > Schedule 1 line 7.

Charitable giving carryover- cash:

• The charitable giving carryover amount- cash will be capped at 60% of the client's AGI. It be seen impacting the plan within the Tax module > Tax Estimate > Details > Schedule A, under Gifts to charity.

Charitable giving carryover- appreciated assets:

• The charitable giving carryover amount- appreciated assets will be capped at 30% of the client's AGI. It be seen impacting the plan within the Tax module > Tax Estimate > Details > Schedule A, under Gifts to charity.

AMT credit carryforward:

• Enter the AMT credit carryforward amount from prior years exercise of ISO grants. This can be seen impacting taxes in the Tax module > Tax Estimate > Details > Alternative Minimum Tax form.