My regular readers are now experts in the concept of statutory residency: Have a permanent place of abode and be present in the jurisdiction for more than 183 days and you magically become a tax resident. You also know it is your burden to prove you were not in the jurisdiction and the taxing authorities are under no obligation to prove your presence.

How is it humanly possible to meet the burden of proof, you ask. Well, sometimes it is easy. You leave for Florida the day after Thanksgiving and don’t come back until July 4^th. Of course, you saved your plane tickets to and from Florida. You also charged something every single day and played golf at least five times a week. Any reasonable auditor is going to agree that you have met your burden of proof and there is no doubt you weren’t in the jurisdiction.

While most provisions of the Tax Cuts and Jobs Act (TCJA) went into effect in 2018 and either apply through 2025 or are permanent, there are two major changes under the act for 2019. Here’s a closer look.

1. Medical Expense Deduction Threshold

With rising health care costs, claiming whatever tax breaks related to health care that you can is more important than ever. But there’s a threshold for deducting medical expenses that was already difficult for many taxpayers to meet, and it may be even harder to meet this year.

The TCJA temporarily reduced the threshold from 10% of adjusted gross income (AGI) to 7.5% of AGI. Unfortunately, the reduction applies only to 2017 and 2018. So for 2019, the threshold returns to 10% — unless legislation is signed into law extending the 7.5% threshold. Only qualified, unreimbursed expenses exceeding the threshold can be deducted.

Powers of attorney are critical components of an effective estate plan. After you’ve executed powers of attorney, it’s important to review them periodically — at least every five years and preferably more frequently — and consider executing new ones.

2 Types

A sound estate plan should include two types of powers of attorney:

1. Financial power of attorney. Also referred to as a power of attorney for property, this document appoints someone to make financial decisions or execute transactions on your behalf under certain circumstances. For example, a power of attorney might authorize your agent to handle your affairs while you’re out of the country or, in the case of a “durable” power of attorney, incapacitated.

I start this blog with a disclaimer. The same disclaimer provided by the New York State Department of Taxation and Finance (“Department”) at the end of every Advisory Opinion issued. The disclaimer states in part:

An Advisory Opinion is issued at the request of a person or entity. It is limited to the facts set forth therein and is binding on the Department only with respect to the person or entity to whom it is issued and only if the person or entity fully and accurately describes all relevant facts.

Why would I disavow the conclusion before even reaching one? Keep reading (and go back and read my posts from 11.9.15 through 12.28.15) and you will understand:

• 11.9.15 - SALT TALK: Golf and a Little Bit of Residency Planning, Anyone?
• 11.16.15 - SALT TALK: Where You Rest Your Weary Bones May Have No Impact on Tax Residency
• 11.23.15 - SALT TALK: Success and Failure Are Not Permanent, So Why Is My Abode?
• 11.30.15 - SALT TALK: Permanent Place of Abode: Can I Call a Plumber?
• 12.7.15 - SALT TALK: Permanent Place of Abode: Let’s Eat Out
• 12.14.15 - SALT TALK: Permanent Place of Abode: The Nature of the Relationship
• 12.21.15 - SALT TALK: Permanent Place of Abode: Taking Ownership
• 12.28.15 - SALT TALK: Permanent Place of Abode: Year End Shopping Tips

We have discussed many times in the past that in New York State (and City) as well as numerous other tax jurisdictions there are two ways to be considered a resident (and thereby taxed on worldwide income) for income tax purposes. First, the domicile test. It is the “touchy-feely” test of what your intentions are and where you intend your home to be. Then there is the arguably more objective statutory resident test. If you have a “permanent place of abode” (“PPA,” a term of art, which is at the center of this blog) and are “present” in the jurisdiction for more than 183 days, you are a resident.

The dawning of 2019 means the 2018 income tax filing season is upon us. After year end, it’s generally too late to take action to reduce 2018 taxes. Business owners may, therefore, want to shift their focus to assessing whether they’ll likely owe taxes or get a refund when they file their returns this spring, so they can plan accordingly.

With the biggest tax law changes in decades — under the Tax Cuts and Jobs Act (TCJA) — generally going into effect beginning in 2018, most businesses and their owners will be significantly impacted. So, refreshing yourself on the major changes is a good idea.

If your son or daughter currently is home from college on winter break, now is a good time to sit down and discuss a few estate planning documents he or she should have at this stage of life. Let’s take a closer look at four such documents:

1. Health Care Power of Attorney. With a health care power of attorney (sometimes referred to as a “health care proxy” or “durable medical power of attorney”), your child appoints someone — probably you or his or her other parent — to make health care decisions on his or her behalf should he or she be unable to do so. A health care power of attorney should provide guidance on how to make health care decisions. Although it’s impossible to anticipate every potential scenario, the document can provide guiding principles.

I have lost count as to the number of times I have received a panicked call (from non-clients, of course) days before a transaction is about to close. The question is often the same; “What’s all this noise I hear about the bulk sales tax?”

Well, the good news is there is no additional tax added to the sale of a business or all of its assets. The bad news, however, is that states have a bulk sales notification requirement and the rules are as diverse as the states themselves.

Bulk sales rules provide a notification mechanism to the taxing authorities. It is often their last chance to collect already existing liabilities of the seller and in some jurisdictions, liabilities that arise as a result of the sale. Failure to comply with the rules can leave the buyer responsible for the seller’s tax liabilities.

Retirement plan contribution limits are indexed for inflation, and many have gone up for 2019, giving you opportunities to increase your retirement savings:

• Elective deferrals to 401(k), 403(b), 457(b)(2) and 457(c)(1) plans: $19,000 (up from $18,500)
• Contributions to defined contribution plans: $56,000 (up from $55,000)
• Contributions to SIMPLEs: $13,000 (up from $12,500)
• Contributions to IRAs: $6,000 (up from $5,500)

Portability allows a surviving spouse to apply a deceased spouse’s unused estate tax exemption amount toward his or her own transfers during life or at death. To secure these benefits, however, the deceased spouse’s executor must have made a portability election on a timely filed estate tax return. The return is due nine months after death, with a six-month extension option.

Unfortunately, estates that aren’t otherwise required to file a return (because they don’t meet the filing threshold) often miss the deadline. Several years ago, the IRS offered a simplified procedure for obtaining an extension, but it was available only through the end of 2014. After that, the only option was to request a private letter ruling from the IRS, a time-consuming, expensive process with no guarantee of success.

The holiday season is upon us and the spirit of gift giving and generosity is permeating everything we do.  Those of us who have not given all we want to our favorite charities are rushing to send donations before year-end.  Charities, obviously well aware of the donor crunch to get the charitable contribution deduction in the current year are spending significant amounts of their campaign budgets at this very moment.  They remind us all, give until it hurts.

Nevertheless, who ever thought we would be receiving such solicitations from our friendly state tax agency?  Several states, including New York, New Jersey and Connecticut are responding to the federal Tax Cuts and Jobs Act (TCJA) limit on state and local tax (SALT) deduction by converting your tax liability to a charitable contribution.  For those of you non-believers in the art of alchemy, maybe it is time to rethink the matter.