Impact and Ideas

View our tax-planning strategies webcast

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Tax efficient strategies

Here we offer a number of strategies to make the most of the current environment.

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Tax aware borrowing

Interest paid on certain types of personal debt can help reduce the true cost of borrowing for U.S. taxpayers.

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Liquidity for tax season — and beyond

A large tax bill is due. And idea real estate property hits the market. A unique business opportunity emerges.

You have three options for the funds you need. We can help you determine what is right for you.

Using available cash
Using available cash

is always an option, but regularly holding cash balances can have high opportunity costs

Selling assets
Selling assets

can trigger unfavorable tax consequences or disruptions to your investment portfolio

Having a line of credit
Having a line of credit

that uses the securities in your portfolio as collateral may be a smarter short- and long-term solution

Our short video explains the key advantages of a securities-based line of credit

Start considering your 2018 tax rates

At this time of year, we talk to clients about tax-management strategies that will help keep your investment plans on track while you focus on meeting your tax obligations.

To help you understand your tax obligations, we have provided the updated tax rates for 2018.

Click on your filing status below to get started.

Filing status1

 

 

Income2

 

 

 

 

 

 

 

 

 

Income2

 

 

 

 

 

 

 

 

 

 

Your maximum federal income tax rate on wage income 10%
Your share of Medicare tax on wages 1.45%
Your share of Social Security tax on wages = 6.2% of wages up to $128,400 $7,960.804
Your maximum tax rate on long-term capital gains and dividend income 0%
Your maximum tax rate on unearned income – other than capital gains and dividends 10%
Your maximum federal income tax rate on wage income 12%
Your share of Medicare tax on wages 1.45%
Your share of Social Security tax on wages = 6.2% of wages up to $128,400 $7,960.804
Your maximum tax rate on long-term capital gains and dividend income 0%
Your maximum tax rate on unearned income – other than capital gains and dividends 12%
Your maximum federal income tax rate on wage income 12%
Your share of Medicare tax on wages 1.45%
Your share of Social Security tax on wages = 6.2% of wages up to $128,400 $7,960.804
Your maximum tax rate on long-term capital gains and dividend income 15%
Your maximum tax rate on unearned income – other than capital gains and dividends 12%
Your maximum federal income tax rate on wage income 22%
Your share of Medicare tax on wages 1.45%
Your share of Social Security tax on wages = 6.2% of wages up to $128,400 $7,960.804
Your maximum tax rate on long-term capital gains and dividend income 15%
Your maximum tax rate on unearned income – other than capital gains and dividends 22%
Your maximum federal income tax rate on wage income 24%
Your share of Medicare tax on wages 1.45%
Your share of Social Security tax on wages = 6.2% of wages up to $128,400 $7,960.804
Your maximum tax rate on long-term capital gains and dividend income 15%
Your maximum tax rate on unearned income – other than capital gains and dividends 24%
Your maximum federal income tax rate on wage income 32%
Your share of Medicare tax on wages 1.45%
Your maximum Social Security tax on wages $7,960.804
Your maximum tax rate on long-term capital gains and dividend income 15%
Your maximum tax rate on unearned income – other than capital gains and dividends 32%
Your maximum federal income tax rate on wage income 35%
Your share of Medicare tax on wages 2.35%3
Your maximum Social Security tax on wages $7,960.804
Your maximum tax rate on long-term capital gains and dividend income 18.8%
Your maximum tax rate on unearned income – other than capital gains and dividends 38.8%
Your maximum federal income tax rate on wage income 35%
Your share of Medicare tax on wages 2.35%
Your maximum Social Security tax on wages $7,960.804
Your maximum tax rate on long-term capital gains and dividend income 23.8%
Your maximum tax rate on unearned income – other than capital gains and dividends 38.8%
Your maximum federal income tax rate on wage income 37%
Your share of Medicare tax on wages 2.35%
Your maximum Social Security tax on wages $7,960.804
Your maximum tax rate on long-term capital gains and dividend income 23.8%
Your maximum tax rate on unearned income – other than capital gains and dividends 40.8%
Your maximum federal income tax rate on wage income 10%
Your share of Medicare tax on wages 1.45%
Your share of Social Security tax on wages = 6.2% of wages up to $128,400 $15,921.604
Your maximum tax rate on long-term capital gains and dividend income 0%
Your maximum tax rate on unearned income – other than capital gains and dividends 10%
Your maximum federal income tax rate on wage income 12%
Your share of Medicare tax on wages 1.45%
Your share of Social Security tax on wages = 6.2% of wages up to $128,400 $15,921.604
Your maximum tax rate on long-term capital gains and dividend income 0%
Your maximum tax rate on unearned income – other than capital gains and dividends 12%
Your maximum federal income tax rate on wage income 12%
Your share of Medicare tax on wages 1.45%
Your share of Social Security tax on wages = 6.2% of wages up to $128,400 $15,921.604
Your maximum tax rate on long-term capital gains and dividend income 15%
Your maximum tax rate on unearned income – other than capital gains and dividends 12%
Your maximum federal income tax rate on wage income 22%
Your share of Medicare tax on wages 1.45%
Your share of Social Security tax on wages = 6.2% of wages up to $128,400 $15,921.604
Your maximum tax rate on long-term capital gains and dividend income 15%
Your maximum tax rate on unearned income – other than capital gains and dividends 22%
Your maximum federal income tax rate on wage income 24%
Your share of Medicare tax on wages 1.45%
Your maximum Social Security tax on wages $15,921.604
Your maximum tax rate on long-term capital gains and dividend income 15%
Your maximum tax rate on unearned income – other than capital gains and dividends 24%
Your maximum federal income tax rate on wage income 24%
Your share of Medicare tax on wages 2.35%3
Your maximum Social Security tax on wages $15,921.604
Your maximum tax rate on long-term capital gains and dividend income 18.8%
Your maximum tax rate on unearned income – other than capital gains and dividends 27.8%
Your maximum federal income tax rate on wage income 32%
Your share of Medicare tax on wages 2.35%
Your maximum Social Security tax on wages $15,921.604
Your maximum tax rate on long-term capital gains and dividend income 18.8%
Your maximum tax rate on unearned income – other than capital gains and dividends 35.8%
Your maximum federal income tax rate on wage income 35%
Your share of Medicare tax on wages 2.35%
Your maximum Social Security tax on wages $15,921.604
Your maximum tax rate on long-term capital gains and dividend income 18.8%
Your maximum tax rate on unearned income – other than capital gains and dividends 38.8%
Your maximum federal income tax rate on wage income 35%
Your share of Medicare tax on wages 2.35%
Your maximum Social Security tax on wages $15,921.604
Your maximum tax rate on long-term capital gains and dividend income 23.8%
Your maximum tax rate on unearned income – other than capital gains and dividends 38.8%
Your maximum federal income tax rate on wage income 37%
Your share of Medicare tax on wages 2.35%
Your maximum Social Security tax on wages $15,921.604
Your maximum tax rate on long-term capital gains and dividend income 23.8%
Your maximum tax rate on unearned income – other than capital gains and dividends 40.8%

Source: J.P.  calculations, JCT, U.S. Social Security Administration, Tax Cuts and Jobs Act, www.ssa.gov/news/press/factsheets/colafacts2018.pdf

1The income tax rate is imposed on taxable income of the amounts shown in this row; the long-term capital gains tax rate is also based on taxable income.
2,3Note that employers will begin to withhold when an employee’s income reaches $200,000 even if the employee and his or her spouse would not reach the $250,000 threshhold; the additional tax collected can be claimed as a credit on the couple’s joint return.
4The OASDI tax is not imposed on wages above $128,400, although the tax is imposed on the wage income of each member of a couple, if applicable, so a couple could pay up to $15,921 on income of $256,800 if each of them made at least $128,400.

JPMorgan Chase & Co. and its affiliates do not provide tax advice. Accordingly, any discussion of U.S. tax matters contained herein (including any attachments) is not intended or written to be used, and cannot be used, in connection with the promotion, marketing or recommendation by anyone unaffiliated with JPMorgan Chase & Co. of any of the matters addressed herein or for the purpose of avoiding U.S. tax-related penalties.

Tax-efficient strategies for 2018

Key considerations for wealth planning and asset protection

While there are a number of new tax provisions to navigate, there are also ways to potentially capitalize on the new regime

 

Low borrowing rates may offer you access to inexpensive capital, which can help you manage both your investments and your liabilities.

Establish a line of credit against an investment portfolio

  • Optimize cash flow and maintain liquidity during tax season, or at any point during the year when a tax payment is due—and avoid the disruptive liquidation of a carefully planned investment portfolio
    • This will allow you to continue to hold investments for more favorable capital gains treatment in the future
  • Interest paid on money borrowed for investing is deductible up to the amount of net investment income for the year, with any excess carried forward

Maximize efficiencies through home financing

  • Home equity loans or lines of credit may offer financial flexibility, though they are no longer tax-deductible
  • Take advantage of the mortgage interest deduction (for interest paid on up to $750,000 of principal indebtedness) for primary residences and second homes with a mortgage or secured line of credit
  • Borrow to support 1031 exchanges–selling real estate and replacing it with like kind property within the applicable time period to avoid triggering capital gains tax on the original sale

The tax rate for upper income earners (individual $500,000, joint $600,000) remains high at 40.8% (including the 3.8% Medicare surtax), making a tax-aware approach even more important.

Look for tax-advantaged solutions

  • Dividend strategies remain attractive; the tax rate on qualified dividends is still at parity with capital gains, and the highest rate is 23.8%, not the 40.8% rate that applies to certain types of income like interest, rent, royalties, etc.
  • Interest income from municipal bonds is typically not subject to federal income tax or the 3.8% Medicare surtax
  • Consider variable annuities, which defer the recognition of earnings and gains for income tax purposes, allowing the value of the assets to compound tax-deferred and provide significantly more value over time

The tax and economic landscape is always changing, but there are tax-aware ways you can revisit your own wealth planning.

Convert your traditional retirement assets to Roth IRAs

  • Accelerate income recognition through Roth conversions. Recharacterizing a Roth IRA is no longer permitted, so be sure that a conversion makes sense for you
  • Although the amount that is converted to a Roth will be taxed at ordinary income rates at the time of conversion, the benefits of Roth IRAs remain powerful because Roth IRAs grow tax-free and are not subject to minimum distribution requirements.

Defer income to grow assets

  • Funding a 401(k), deferred compensation plan or other deferral arrangement can delay the taxes that would be due on income and investment returns, preserving more value that can compound for as long as possible
  • Assuming that tax rates remain constant during the deferral period, the federal rate would have to increase dramatically in the year assets are distributed out of the deferred account to justify not deferring now

WealthFocus - Strategies and insights focused on your goals

It is important to consider the recent tax law changes in the context of their impact on your long term goals. These articles provide insights on a range of topics to help ensure that your wealth will continue to benefit you and your family.

ADDITIONAL CONSIDERATIONS
J.P. Morgan Lines of Credit may not be used to purchase, trade or carry securities or to repay debt used to purchase, trade or carry securities. Please note that lines of credit are extended at the discretion of J.P. Morgan, and J.P. Morgan has no commitment to extend a line of credit or make loans available under the line of credit. Any extension of credit is subject to credit approval by the lender in accordance with the terms contained in definitive loan documents. Loans collateralized by securities involve certain risks and may not be suitable for all investors. Please note that assets used as collateral for a securities based line of credit are subject to liquidation to meet margin calls. Margin calls may include the sale of the asset serving as collateral if the collateral value declines below the amount required to secure the line of credit. In exercising its remedies, J.P. Morgan will not be required to marshal assets or act in accordance with any fiduciary duty it otherwise might have.

IMPORTANT INFORMATION
JPMorgan Chase & Co. and its affiliates do not provide tax advice. Accordingly, any discussion of U.S. tax matters contained herein (including any attachments) is not intended or written to be used, and cannot be used, in connection with the promotion, marketing or recommendation by anyone unaffiliated with JPMorgan Chase & Co. of any of the matters addressed herein or for the purpose of avoiding U.S. tax-related penalties. Bank products and services are offered by JPMorgan Chase Bank, N.A. and its affiliates. Securities are offered by J.P. Morgan Securities LLC, FINRA and SIPC.

This material is not intended as an offer or solicitation for the purchase or sale of any financial instrument. J.P. Morgan Securities LLC or its brokerage affiliates may hold a position or act as market maker in the financial instruments of any issuer discussed herein or act as an underwriter, placement agent, advisor or lender to such issuer. The views and strategies described herein may not be suitable for all investors. The discussion of loans or other extensions of credit in this material is for illustrative purposes only. No commitment to lend by J.P. Morgan should be construed or implied. This material is distributed with the understanding that we are not rendering accounting, legal or tax advice. You should consult with your independent advisors concerning such matters. The information provided may inform you of certain products and services offered by J.P. Morgan Securities business, part of JPMorgan Chase & Co. Additional information is available upon request.

Any views expressed in this material are those of J.P. Morgan Securities that may differ from other JPMorgan Chase & Co. affiliates and employees. There is no guarantee that any outlooks or past performance will occur in the future. This constitutes our judgment based on current market conditions that are subject to change without notice. This material should not be regarded as research or as a J.P. Morgan Research Report.

Although third-party information has been obtained from sources believed to be reliable, JPMorgan Chase & Co. and its affiliates do not guarantee its accuracy or completeness and accept no liability for any direct or consequential losses arising from its use.

“J.P. Morgan Securities” is a brand name for private banking business conducted by JPMorgan Chase & Co (“JPMC”) and its subsidiaries worldwide. JPMorgan Chase Bank, N.A. and its affiliates (collectively “JPMCB”) offer investment products, which may include bank-managed accounts and custody, as part of its trust and fiduciary services. Other investment products and services, such as brokerage and advisory accounts, are offered through J.P. Morgan Securities LLC (JPMS), a member of FINRA and SIPC. JPMCB and JPMS are affiliated companies under the common control of JPMorgan Chase & Co.

INVESTMENT PRODUCTS:
• NOT FDIC INSURED • NO BANK GUARANTEE • MAY LOSE VALUE

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