The IRS is still issuingguidance to explain and provide details on the law, which means taxadvisers have some leeway — and uncertainty — in interpreting thelegislation. (Photo: Shutterstock)

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(Bloomberg) –President Trump pledged that his tax law would kill off breaks and complex loopholes for thewealthy. Instead, the overhaul has ushered in a new generation ofmaneuvers that taxpayers can exploit before Dec. 31 to minimizenext year's bills.

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Some tactics capitalize on provisions in the law that provide benefits,such as a generous break for owners of pass-through entities likepartnerships and a higher exemption amount for the estate tax.

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Other strategies are aimed at sidestepping new limits in thelaw, including the cap on state and local tax deductions.

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“The number of clients asking about things that they've readabout has increased 10-fold,” said Brad Sprong, national tax leaderin accounting firm KPMG's private markets group. “The tax guys arecool again. We're no longer the geeks in the corner.”

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The IRS is still issuing guidance to explain and provide detailson the law, which means tax advisers have some leeway — anduncertainty — in interpreting the legislation.

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While the agency generally gives taxpayers a break if they'rereasonably applying the law and acting in good faith, it couldstill ultimately invalidate some tax-saving transactions.

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And for taxpayers who miss out on making any changes before theend of the year, there may be some good news ahead: Next year'spolitically divided Congress is unlikely to make any large-scalemodifications to the 2017 law, so these moves could still beviable.

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Bunching expenses

Owners of partnerships, limited liability companies and otherpass-throughs received a large gift in the tax law — a 20 percentdeduction on their taxable income.

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But that write-off is subject to limitations starting at incomesof $315,000 for married couples.

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To get around that, pass-through owners can strategically“bunch,” or ramp up their expenses this year, which will help tolower their income and allow for the full deduction, according toEd Reitmeyer, regional partner-in-charge of the tax and businessservices at accounting firm Marcum.

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For example, firms planning to buy more equipment and makeupgrades to their facilities could do it all this year instead ofspreading it out over several years.

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Additionally, companies could give higher bonuses this year tomaximize wages paid out — since the 20 percent deduction can belimited if an employer doesn't pay a certain amount in employeewages.

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Service professionals, such as doctors, are generally prohibitedfrom taking the deduction entirely if they're married and make morethan $415,000. Some of those businesses could split themselves intwo — one for the service part and the other for the manufacturingcomponent, for example for a medical device — to separate theservice income ineligible for the deduction.

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If the business is reorganized before the end of the year, theIRS will still allow the deduction as if it'd been separated forthe whole year, Sprong said.

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Non-grantor trusts

One of the most bitterly opposed parts of Trump's tax law wasthe $10,000 cap on so-called SALT deductions, for state and localtaxes.

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Some tax accountants have helped clients in high-tax states setup special trusts that can help to get around the limit. Here's howit works: Clients transfer their homes into limited liabilitycompanies, and then transfer the interests in the LLCs intonon-grantor trusts, and each trust takes the maximum $10,000deduction. So if you have a $50,000 property tax bill, you can setup five separate trusts, with each taking the $10,000deduction.

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The strategy has some drawbacks — setting up the trusts can becostly and the homeowner would need to put enough income-generatingassets into the trust to balance out the $10,000 deduction. The IRScould also move to block the strategy. But for top-earners livingin high-tax states, the savings could well justify the costs andthe hassle, accountants say.

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Get divorced ASAP

The overhaul eliminates the deductions for alimony payments fordivorces finalized starting in 2019.

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For many wealthy couples, reaching a deal by Dec. 31 could meantens of thousands of dollars in tax savings every year.

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The richer you are, the more homes, possessions, investments andbusinesses there are to fight over. The result is often expensivenegotiations that stretch on for years, as each party tries toinflict maximum damage on the other.

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If you're just starting divorce proceedings now, ending amarriage by year end will be difficult, if not virtuallyimpossible. Still, there may be a workaround: If a settlementagreement, which often includes alimony terms, is reached by theDec. 31, many divorce lawyers said that would likely be sufficientto get the alimony tax break.

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IRA donations

Those who are aged over 70 1/2 must start taking mandatorydistributions from their individual retirement accounts, whichgenerate taxable income for the recipient.

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However, making charitable donations of as much as $100,000directly from IRAs checks the box for a mandatory distribution —and avoids the extra taxable income.

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Another perk of the IRA donation is that older taxpayers don'thave to itemize deductions on their taxes to get the benefit. Moreindividuals are expected to take the new, expanded standarddeduction — $24,000 for a couple — set by the tax law, rather thancontinue to itemize.

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Still, the donation doesn't qualify for a charitable deductionsince the IRS considers getting a deduction on untaxed income to bedouble dipping.

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Opportunity zones

The tax law creates special tax breaks in so-called OpportunityZones, economically disadvantaged areas where the U.S. governmentis trying to promote investment.

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Investors can take proceeds that would be subject to capitalgains taxes — such as those from the sale of a business or stock —and put them into Opportunity Zone funds to defer and potentiallyreduce those taxes. They can also avoid taxes on the funds' gainscompletely.

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Opportunity Zone designations are good for 10 years, but time isof the essence for investors who've recently sold their stock orbusiness: The rules say proceeds have to be put in a fund withinsix months to qualify. And Reitmeyer added that there are too fewOpportunity Zone funds to meet the demand by investors.

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Dynasty trusts

The ultra-rich have been turning to a key tool — the dynastytrust — to take advantage of the law doubling the amount that canbe passed to heirs without being subject to estate and gifttaxes.

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The new threshold of $22 million for married couples means thetrusts can be funded tax-free with assets up to that amount.Amounts over exemption levels are taxed at 40 percent.

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The nation's top wealth planners have said they're seeingincreased interest in the trusts as clients look to capitalize onthe additional $11 million they can now easily shift over.

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Some families want to transfer money out of their estates intothe trusts in case Democrats take back control of Congress and pullthe limits back down, while others say it's best to move assetsbefore they appreciate even more.

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Some had been worried that come 2026, when the higher exemptionamounts are set to expire, the IRS might attempt to collect taxeson gifts that were already made under the doubled exemptions. Butthe IRS said in November that it won't seek such retroactivetaxes.

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Taxpayers can also give each family member as much as $15,000this year without using up any of their estate and gift taxexemption.

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READ MORE:

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4 new challenges created for employers by the taxact

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How retirees could be affected by the new taxlaw

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Rich professionals using pension plans as taxdodge

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Copyright 2018 Bloomberg. All rightsreserved. This material may not be published, broadcast, rewritten,or redistributed.

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