“Other than the real estate clients, I would say almost across the board most other clients, most other industries, professions, etcetera, have all been hurt by this new tax law,” Mark Hausner, principal in the accounting firm Peretz, Resnick, Mitgang & Marcus LLP, told the Business Journal.
Hausner along with a partner in that firm, Robert Mitgang and David Peretz, the managing partner who began the firm in 1987, provided their takes on the impact the changes in federal tax law had on their practice and its clients.
“We had done extensive tax planning in anticipation once we read and learned the law to try and assist clients who no longer were able to take miscellaneous deductions. That was an enormous deduction for a lot of clients. There were things that we were able to suggest and do to try to alleviate that kind of a hit but, in general, I couldn’t even count how many clients went from what in 2018 used to be a $3,000, $5,000, $7,000 refund to a $3,000, $5,000, $7,000 balance due,” Hausner said.
“A lot of our clients were in alternative minimum tax (AMT) categories in the past,” Peretz said, explaining why a major feature of the tax changes, the loss of full deductibility of state and local taxes, did not turn out to be significant for some individuals.
“They lost their state income tax deduction, they lost their miscellaneous itemized deductions, but they had different tax rates. I have one client who just basically broke even. He lost his very large real estate taxes (deduction) in New Rochelle and, instead, he also got rid of his alternative minimum tax, so it basically was a wash.”
The Tax Policy Center estimated that instead of approximately 6 million filers having to pay the AMT, only about 200,000 would have to do that once the changes were in effect. The changes in AMT rules, however, are scheduled to expire in 2025.
“There are a lot of specifics to the new tax law, which were driven dramatically for real estate investors and real estate professionals, No. 1 because our president is one of those, but that have affected a lot of our clients,” Hauser said. “For most real estate people it has been positive because there are certain benefits on pass-through income from various entities and we have clients with dozens and dozens, even hundreds, of entities and they get to save a percentage of that income as nontaxable.”
The changes included a 20% deduction of qualified business income, so only 80% of pass-through income was taxable to recipients.
Mitgang pointed out that the revised tax law allows the establishment of Opportunity Zones and Qualified Opportunity Funds, which allow investors to defer tax on certain financial gains and, if investments are held long enough, to exclude from taxation a portion of the deferred gain. The zones are designed to spur economic development and job creation in distressed communities.
“What’s been a pleasant surprise is that some of those zones have been in areas that you would not have considered would have to be designated as opportunity zones. So that’s something the real estate clients, the real estate developers, can benefit from. That’s brand new,” he said.
Peretz said the increase in the point at which the federal estate tax kicks in benefits some of the firm’s clients. A decedent’s estate could be $11,180,000 in 2018 with no federal estate tax due and couples who engage in proper planning could exclude twice that amount
“Twenty-two, 23 million of estate assets are not that uncommon in our clientèle,” he said. “We have a few that are much larger and we work with attorneys and estate planners.”
“Many of our clients are well aware that the estate tax laws today could easily change a few years from now or well within their span of necessary planning, so you have to stay on top of it,” Mitgang added.
The firm employs 32 people and occupies about 9,000 square feet at 303 S. Broadway in Tarrytown.
“My largest clients think that having the additional people and more expertise in specific areas might be beneficial to them,” Peretz said. “We do very little looking for clients. Our clients seem to come to us because of our reputation, because of referrals by bankers, lawyers and other clients, particularly other clients, so we have grown that way in addition to acquiring other practices.”