January 2018 Note from the Principals

Just as 2017 was coming to a close, Washington passed a sweeping tax bill that may impact your daily spending and self-directed IRA approach. You’ll begin receiving this year’s tax documents now that we’ve reached January, so we strongly recommend coordinating with your tax and financial advisors to determine a suitable course of action in light of the new legislation.

Lower income brackets may prompt new considerations for your long-term investment strategy. You’ll likely experience a reduced tax burden in the immediate term, but the new benefits are scheduled to sunset after 2025. It may therefore behoove self-directed investors to forecast their approximate tax situations and make any necessary adjustments. Furthermore, if you’ve ever executed a Roth conversion, it appears you won’t be able to re-characterize any converted cash or assets beginning in 2018. This means your conversions will be permanent, so you may continue to yield the substantial benefits of a Roth IRA but could never return your holdings to a pre-tax status (i.e. move your Roth IRA holdings back to a Traditional IRA).

There were initial concerns that a tax overhaul would involve lower contribution limits or diminished tax advantages, but we’re pleased to see none of these concerns came to fruition. Solo 401(k) and health savings account (HSA) contributions will increase while all others will remain the same.

We want to wish each and every one of our clients a happy and prosperous New Year! For more information about your IRA account or self-directed investing in general, please don’t hesitate to contact New Direction IRA.

Bill Humphrey & Catherine Wynne

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