A ‘dead’ home-equity tax deduction sees new life thanks to IRS

President Donald Trump’s new tax law set off a false alarm for homeowners planning to borrow against the equity in their houses.

The legislation signed by Trump in December appeared to eliminate the deduction taxpayers get for the interest owed on home-equity loans, spooking the home remodeling industry whose customers often rely on the loans for projects. But after prodding from lobbying groups, the Internal Revenue Service clarified that borrowers could still use the deduction, as long as it’s for home improvements.

The IRS guidance on home-equity debt is just the latest example of the agency’s cleanup effort in the wake of the hastily passed law. Various industries and tax professionals are still struggling to understand its provisions and interpret lawmakers’ intentions on changes including the pass-through deduction and international tax measures.

Homes in an aerial photograph taken above New JerseyCraig Warga/Bloomberg

Since the end of last year, the agency has issued press releases specifying that hedge fund managers can’t circumvent new carried interest rules with “S” corporations and that homeowners can deduct prepaid property taxes only in some instances.

Until the IRS statement late last month about the home-equity deduction, some housing groups including executives at the National Association of Home Builders said they didn’t think it was clear the home-equity deduction had survived, at least in part.

‘Industry Lifeblood’

The NAHB sent Treasury Secretary Steven Mnuchin a letter at the end of January arguing that the tax law, as written, should allow interest from home-equity loans and home-equity lines of credit to be deducted as long as the homeowner used the money for home improvements. They said their interpretation was backed up by long-accepted standards in the tax code.

“As most major remodeling projects are financed using debt secured by the buyer’s home, the deductibility of interest paid on loans used to substantially improve a home is the lifeblood of the industry,” the letter said.

Eric Smith, an IRS spokesman, said the news release came in response to multiple inquiries rather than from a specific group. He said the statement clarified what the law already said rather than made new rules.

Robert Criner, a remodeler in Newport News, Virginia, said that after the law passed, he thought the deduction for home-equity loans and for so-called HELOCs was dead. The ability to deduct HELOC interest is a deciding factor for some homeowners on how big a project to undertake or whether to do a remodel at all, according to Criner.

Throughout the tax-bill process “people were waiting to pull the trigger,” said Criner, which he attributed to the HELOC issue and to broader confusion about the bill. Criner said even after the IRS clarification, only about half of his customers realize that they can still deduct the interest.

Flawed Survey

The confusion stemmed from the law saying it was eliminating interest for “home-equity indebtedness.” Some borrowers, remodelers and others in the lending industry interpreted that as any kind of home-equity loan that taps equity to provide cash. But the tax code has long defined home-equity indebtedness as any kind of debt except loans taken out to acquire, construct or substantially improve a taxpayer’s residence.

So if a borrower uses the loan to build a new bathroom, it would qualify for the deduction, but if it’s used to consolidate credit card debt, it wouldn’t qualify, according to the IRS’s clarification.

In January, LendEDU, a comparison website for consumer financial products, surveyed 1,000 Americans who were home-equity loan borrowers, about half of whom said they used the money for home improvement. The company wanted to measure how aware they were that the new law limited home-equity deductibility.

The problem: None of the survey’s answers were correct. LendEDU falsely believed the new law completely killed the home-equity interest deduction, and the survey results were reported in several mainstream and industry publications.

LendEDU CEO Nate Matherson said the company would put a clarification at the top of the survey. Noting that the IRS hadn’t yet issued its guidance at the time of the survey, Matherson said, “At the time the survey was conducted, the methodology was accurate.”

‘Detrimental Effect’

The NAHB, a lobbying group that represents small home builders, believed it had a good case but still wasn’t completely sure that the IRS would agree with its interpretation, said David Logan, the association’s director of tax and trade policy analysis.

The home-equity interest deduction wasn’t a focus for the group last year when it was lobbying lawmakers on its bigger concerns with the bill — such as the doubling of the standard deduction. Still, once the law came out, there was concern that eliminating home-equity interest deductions would have a “massive detrimental effect on remodelers,” Logan said.

When the IRS agreed with the NAHB’s interpretation, Logan said the group’s remodelers were “exuberant.”

Source: Bloomberg News

How old are your kids? The answer could determine your tax bill

Earlier this year Jay Charles’s twice-a-month paycheck jumped by $65, a result of the new U.S. law that cuts taxes almost $1.5 trillion over the next decade. Then he did the math.

It turns out Charles, a 48-year-old software developer in Blythewood, South Carolina, may not get a tax cut at all. He and his wife don’t have children and won’t be able to benefit from an enhanced child tax credit—and they’ll be losing some benefits including unlimited state and local tax deductions. An online calculator showed Charles he’ll break even, and his wife, a professor who files separately, will probably see a tax increase.

For many Americans, the most noticeable effect of the tax law so far is a jump in their take-home pay. After the law passed, the Internal Revenue Service issued new withholding tables, directing employers to adjust how much tax money they take from workers’ paychecks starting in February. Those withholding amounts are effectively a guess at what employees’ tax liabilities will be for 2018.

Some taxpayers are finding the tables are a blunt tool. When 2018 taxes are due in April 2019, millions of Americans could find themselves owing the government far more than was withheld. Millions of others could find they paid too much in 2018, resulting in unusually large refunds. Which category you fall in could come down to whether you have any dependents and how old they are, if you itemize deductions, and whether you’re a two-income family.

In the meantime, the tax withholding amounts could have political consequences. Control of Congress is at stake in November’s elections, and the tax law is on track to become a top issue. Voters’ opinions may depend on whether they think they’re personally getting a fair share of benefits from the law signed by President Donald Trump in December.

Withholding is based on W-4 forms, typically filled out by workers when they start a job and rarely adjusted afterward. After the tax overhaul made parts of the old W-4 obsolete, the Treasury Department and the IRS issued a new form on Feb. 28, and unveiled an online calculator to help workers get their withholding right. Workers won’t be required to submit new W-4s, however, and many are unlikely to bother.

“This year it’s more critical than ever for all taxpayers to assess their personal situation, to make sure they have withholding at the right level,” said Stephen Dombroski, senior payroll tax compliance manager at payroll company Paychex Inc.

The taxpayers most likely to get a nasty surprise when filing taxes next year are those who have typically itemized on their returns and claimed large deductions. That’s especially true if those deductions were for state and local taxes, which are limited to $10,000 by the law, or for unreimbursed employee expenses, which are eliminated entirely. The IRS also urges couples with two incomes, workers with multiple jobs, and taxpayers with lots of dependents to re-check their W-4s.

The bottom line: The more complicated your situation, the more likely your withholding is out of whack, in positive or negative ways.

California Couple

Take, for example, a double-income couple with two teenagers living in California, one of the high-tax states where SALT deduction limits could throw off withholding calculations. They earn a combined $300,000 and deducted $29,000 in SALT, $16,000 in mortgage interest, and $7,000 in charitable contributions on their 2017 tax return.

Though this family gets hurt by the SALT limit, they benefit from changes to the alternative minimum tax, or AMT. Under the old withholding rules—under which the family withheld a relatively high amount, claiming no personal allowances—they’d still end up writing a check of almost $4,000 to the IRS each year, because they were hit by $6,500 in extra taxes from the AMT.

In 2018, the new withholding tables should boost this family’s take-home pay by $8,426, according to estimates by the Tax Institute at H&R Block—a noticeable $702 more per month. They also no longer need to worry about the AMT, which was sharply limited, though not eliminated, by the new law.

Their final bill next April, however, could vary widely based on a factor not reflected on their old W-4s and also unrelated to the SALT and AMT changes—the age of their children.

The former W-4 counted all dependents equally, reflecting a $4,050 personal exemption for every person on a tax return, from toddlers to college-age kids and elderly relatives. The tax revamp eliminated personal exemptions, so the new W-4 must make distinctions between children under the age of 17, who are eligible for an increased $2,000 tax credit, and other dependents who only get a $500 credit. For withholding purposes, then, a child is worth four times the value of other dependents. The law also made the child tax credit available to more upper-income taxpayers.

If the California family’s children are 15 and 16 years old, H&R Block estimates, they’ll get to April and find they owe the IRS $2,758, 30 percent less than last year. However, if their kids are 17 and 18—ineligible for the child tax credit—they’ll need to write a check for $5,773, almost 50 percent more than last year. They’ll even need to pay the IRS a small underpayment penalty of $15.

‘Tax Scam’

The vast majority of U.S. workers will see some tax cut as a result of the law, at least initially. Though the law’s benefits for individuals fade over time, 65 percent of American households can expect a tax cut in 2018 and 6.3 percent will see a tax hike, according to estimates from the Tax Policy Center.

Democrats deride the law, which they’ve branded the “tax scam,” as a giveaway to the wealthy and corporations that offers relatively small, temporary benefits to middle-income taxpayers. In a January letter to the IRS, top congressional Democrats raised concerns that the IRS’s withholding tables might be intentionally skewed to boost workers’ pay now and leave them owing money in 2019, after the midterm elections.

Treasury Secretary Steven Mnuchin said worries about political motives were “ridiculous.” In a letter obtained by Bloomberg News to Senator Ron Wyden, an Oregon Democrat, the IRS said it would “help workers ensure they are not having too much or too little withholding taken out of their pay.”

There’s no evidence that the IRS’s new withholding tables boost paychecks overall by more than they should to reflect the new law. The IRS acknowledges, however, that for individual taxpayers, paychecks could end up being a poor guide to how they’ll ultimately fare under the new law.

Complex Situations

Mnuchin encouraged taxpayers to use the withholding calculator unveiled last week. “The majority of Americans don’t need to do anything, but we always encourage people to have the ability to check their specific situation,” he said.

For many taxpayers in more complex situations, however, the online calculator might not work. The IRS warns that self-employed taxpayers, people with capital gains and dividends, and others might need to wait for more guidance, expected from the agency in “early spring.” In the meantime, they may need to pay a tax adviser to determine their best withholding strategy for 2018.

When Charles realized his situation, he said he adjusted his withholding to erase the boost to his paycheck. He’s not a fan of the new law, which he worries is going to spike the national debt. The windfall from the tax code changes, he said, “is going to fall on a lot of wealthy people and corporations, and none of it is going to me.”

Source: accountingtoday.com, By, Ben Steverman

States could see corporate tax windfall from new tax law

States may receive a major boost in their corporate tax revenues as a result of the Tax Cuts and Jobs Act, according to a new report.

The report, prepared by EY’s Quantitative Economics and Statistics unit on behalf of the Council On State Taxation’s State Tax Research Institute estimates the nationwide overall increase in state corporate income tax bases is 12 percent over the next 10 years, although it predicts significant variations between the states by year. The report estimates the average expansion in the state corporate tax base to be 8 percent from 2018 through 2022, increasing to 13.5 percent for 2022 through 2027.

The growing increase in later years is mainly thanks to the impact of research and experimentation expense amortization starting in 2022 and the change in the interest limitation that same year.

Another important factor behind the projected increase in corporate tax revenue is because states usually conform to federal provisions that broaden the corporate tax base, but not to provisions that reduce corporate tax rates. The magnitude of increased corporate tax collections for each state will depend on how it chooses to conform to the changes in the federal tax code from the new law, the composition of its economy, and the way in which specific provisions within the Tax Cuts and Jobs Act are implemented at the federal level. In some “rolling conformity states,” which conform directly to the federal tax code as it is amended, the changes in the TCJA are already part of that state’s tax law. In others, known as “fixed” or “static conformity states,” the changes from the new tax law will only be incorporated when the state’s legislature enacts legislation to conform.

“This analysis provides estimates of the potential magnitude of the state corporate tax base expansions that could occur with state conformity to provisions of the TCJA,” said EY principal Andrew Phillips in a statement.

The states that are expected to get the greatest estimated percentage change in state corporate tax base from the new tax law are mainly those that tax certain types of foreign income. The impact will also vary by industry based on the tax and financial profiles of companies in each industry sector. The study estimates the change in the state corporate tax base expansion by sector: manufacturing: (12 percent), capital intensive services (17 percent), labor intensive services (9 percent), finance and holding companies (8 percent) and other industries (13 percent).

Pennsylvania and Vermont are expected to see the largest increase, at 14 percent, in the estimated percentage change in the state corporate tax base from the Tax Cuts and Jobs Act, according to the report. The state with the lowest estimated boost, of 4 percent, is Mississippi.

Source: accountingtoday.com / Michael Cohn

IRS says interest on home equity loans can still be deducted

The Internal Revenue Service said Wednesday that taxpayers can continue to deduct the interest they pay on home equity loans “in many cases,” despite the new tax law's limitations on the mortgage interest deduction.

The IRS is getting blitzed by questions from taxpayers and tax professionals alike, asking if the restrictions in the Tax Cuts and Jobs Act on the mortgage deduction also apply to home equity loans. The IRS said Wednesday that despite the newly enacted restrictions on home mortgages, taxpayers can often still deduct interest on a home equity loan, a home equity line of credit or a second mortgage, no matter how the loan is labeled. The new tax law that was passed in December suspends from 2018 until 2026 the deduction for interest paid on home equity loans and lines of credit, the IRS pointed out, unless they are used to buy, build or substantially improve the taxpayer’s home that secures the loan.

For instance, under the new tax law, the interest on a home equity loan for building an addition to an existing house is usually deductible, although interest on the same loan used to pay personal living expenses, such as credit card debts, is not. As under prior law, the loan needs to be secured by the taxpayer’s main home or by a second home, known as a qualified residence. But it can’t exceed the cost of the home, and the loan also needs to meet other requirements.

While the new tax law was being negotiated last year, the mortgage industry and home builders were worried that lawmakers might eliminate the mortgage interest deduction entirely. However, in the end, lawmakers decided to scale back the upper limitations on the deduction instead of getting rid of it completely.

For taxpayers who are trying to decide whether to get a mortgage, the IRS noted that the new tax law imposes a lower dollar limit on mortgages qualifying for the home mortgage interest deduction. Starting this year, taxpayers can only deduct interest on $750,000 of qualified residence loans, or $375,000 for a married taxpayer filing a separate return. That’s down from the previous limits of $1 million, or $500,000 for a married taxpayer filing a separate return. The limits apply to the total amount of loans used to purchase, build or substantially improve a taxpayer’s main home and a second home.

The IRS provided a few examples to show how the new law works:

Example 1: In January 2018, a taxpayer gets a $500,000 mortgage to buy a main home with a fair market value of $800,000. The following month, the taxpayer takes out a $250,000 home equity loan to put an addition on the main home. Both loans are secured by the main home and the total doesn’t exceed the home’s cost. Because the total amount of both loans doesn’t exceed $750,000, all the interest paid on the loans is deductible. But if the taxpayer used the home equity loan proceeds for personal expenses, such as paying off student loans and credit cards, then the interest on the home equity loan wouldn’t be deductible.

Example 2: In January 2018, a taxpayer gets a $500,000 mortgage to buy a main home. The loan is secured by the main home. The following month, the taxpayer takes out a $250,000 loan to buy a vacation home. The loan is secured by the vacation home. Because the total amount of both mortgages doesn’t exceed $750,000, all the interest paid on both mortgages is deductible. But if the taxpayer got a $250,000 home equity loan on the main home to buy the vacation home, then the interest on the home equity loan wouldn’t be deductible.

Example 3: In January 2018, a taxpayer takes out a $500,000 mortgage to buy a main home. The loan is secured by the main home. In February 2018, the taxpayer gets a $500,000 loan to buy a vacation home. That loan is secured by the vacation home. Because the total amount of both mortgages is more than $750,000, not all the interest paid on the mortgages is deductible, but a percentage of the total interest paid would be deductible.

For more information, visit the Tax Reform page on IRS.gov and Publication 936 on the home mortgage interest deduction.

Source: accountingtoday.com / Michael Cohn

IRS warns of new scam involving erroneous tax refunds

The Internal Revenue Service warned taxpayers Tuesday to beware of a quickly proliferating scam involving erroneous tax refunds being deposited in their bank accounts, after a data breach on their tax preparers' computers gives them access to sensitive client information.

The IRS also provided taxpayers with a step-by-step explanation for how they can return the funds and avoid falling prey to the scammers.

The new alert follows up on a Security Summit alert that came out earlier this month warning tax professionals about phishing emails that can download malware onto computers if they are clicked (see IRS sees new filing season scam hitting tax pros). The IRS released the extra warning Tuesday about the new scheme after learning that more tax practitioners’ computer files have been breached. On top of that, the number of potential taxpayer victims jumped from a few hundred to several thousand in only a few days. The IRS’s Criminal Investigation division is continuing to investigate the expanding scope and breadth of this scheme.

Basically this is a new twist on an old scam, the IRS noted. After the cybercriminals steal client data from tax professionals and file fraudulent tax returns, they use the taxpayers' real bank accounts for the deposit. Thieves then employ various tactics to reclaim the refund from taxpayers.

The scam is continuing to evolve in new versions. In one version, the criminals impersonate debt collection agency officials acting on behalf of the IRS. They contact taxpayers to tell them a tax refund was deposited in error and ask taxpayers to send the money to their collection agency.

In another version, the taxpayer who received the erroneous refund receive an automated phone call with a recorded voice saying he is from the IRS and threatens the taxpayer with criminal fraud charges, an arrest warrant and a “blacklisting” of their Social Security Number. The recorded voice provides the taxpayer with a case number and a phone number to call to give back the mistaken refund.

The IRS repeated its warning from last week for tax professionals to increase the security of their sensitive client tax and financial files. The IRS is also asking taxpayers to follow the established procedures for returning an erroneous refund to the Service. The IRS wants taxpayers to discuss the issue with their financial institutions because there may be a need to close bank accounts. Taxpayers who get erroneous refunds also should contact their tax preparers immediately.

As this is now peak season for filing returns, taxpayers who file electronically could find their tax return has been rejected because another return with their Social Security number is already on file. If that happens, taxpayers should follow the steps detailed in the Taxpayer Guide to Identity Theft. Taxpayers who can’t file electronically should mail a paper tax return along with Form 14039, Identity Theft Affidavit, telling the IRS they were victims of a tax preparer data breach. Taxpayers who receive the refunds should follow the steps in Tax Topic Number 161 - Returning an Erroneous Refund. It includes the mailing addresses in case they to return paper checks to the IRS. By law, the IRS noted, interest may accrue on erroneous refunds.

Source: Accounting Today,  Michael Cohn

Top tips for working with tax pros

The National Association of Enrolled Agents asked its tax experts the best practices clients should follow when working with a tax professional, and gave some helpful advice from an online survey whose results were released Monday.

Twenty percent of the enrolled agents surveyed by the NAEA strongly agreed with the notion that all clients should sort their documents using an organizer or organizing system provided by their tax professional, while 21 percent agreed with the statement that “it is impractical to expect new clients to organize their materials using the system with which I am most comfortable.”

However, 47 percent strongly agreed with the statement, “I work more effectively with clients who are willing to learn and adjust the way they organize their documents so that I can serve them better.” In addition, 51 percent strongly agree that taxpayers should schedule an appointment with tax professionals early in the filing season to avoid undesirable outcomes.

“Your willingness to adapt the way you organize your tax documents will help you get the best result from your work with a tax professional, often at a lower cost,” said NAEA President James Adelman in a statement. “Have a conversation with your tax professional at the outset to clarify expectations and preferences on all sides.”

Eighty-three percent of tax pros said clients should use separate bank accounts for business and personal funds, while 81 percent recommended clients should keep their receipts in case their tax returns are examined, and 75 percent said clients should use a mileage log or smartphone app to record the business miles they have driven.

Identifying preferred communication channels and technologies is crucial, along with respecting deadlines and sharing time-sensitive information promptly are also essential. Ninety-six percent of the enrolled agents polled said clients should notify tax pros as soon as they receive a letter or notice from the IRS, while 82 percent said they should tell tax pros about significant life changes such as a retirement or divorce. Eighty percent said clients should consult with tax pros before starting a side job, while 78 percent said clients shouldn’t respond to notices from the IRS without consulting a tax pro.

Enrolled agents prefer to maintain a professional relationship with clients. The survey found 83 percent of the enrolled agents polled agreeing with the statement that advice from tax pros may be quite different from the tips that clients get from friends. Seventy percent of tax pros said their clients should not expect to get the same refund that a neighbor or coworker told them they had received, while 69 percent said “same as last year” is not an acceptable answer to questions from tax pros. In addition, 60 percent said tax pros cannot tell clients how the new tax bill impact their 2018 taxes until they run the numbers, while 52 percent agreed that a “quick question” a client asks a tax pro rarely has a quick or simple answer. 

Source: accountingtoday.com,  Michael Cohn

How is big business using the Trump tax cut? What we know so far

President Donald Trump’s corporate tax cuts are already having a big impact.

The main takeaway at the halfway point of earnings season is that corporations are going to make more money—lots more—as their statutory tax rate gets axed to 21 percent from 35 percent. Corporate chiefs already are making plans for the windfall, with some detailing specific investments in infrastructure or technology along with their one-time charges and benefits.

So far a record 75 percent of companies have raised their profit guidance, according to strategists at JPMorgan Chase & Co. Taking into account the benefits of lower corporate taxes, Wall Street expects U.S. firms to increase capital expenditures by as much as 6.8 percent this year—more than five times the projected growth in 2017.

There are other needs too beyond capital spending: Higher pay for workers in a tight labor market, balance-sheet repair and returns to investors through buybacks and dividends. Many of the big announcements so far represent multiyear plans with big headline numbers but only broadly sketched details.

Cash Flow

Citing the lower tax rate, AT&T Inc. said free cash flow this year will surge almost 20 percent to $21 billion, giving the phone carrier more financial flexibility.

The telecom giant had already announced it would invest an additional $1 billion in the U.S., helping the company prepare for the transition to a new fifth-generation mobile network, and give $1,000 bonuses to workers, thanks to reforms that Chief Executive Officer Randall Stephenson called “capital freeing.”

Chief Financial Officer John Stephens also made clear the company sees reform strengthening AT&T’s financial position. “We see a significant boost to our balance sheet, reducing $20 billion of liabilities and increasing shareholder equity by a like amount,” he said last week on a call.

Lockheed Martin Corp., the world’s largest defense contractor, is earmarking some of its expected windfall for pensioners. The company plans to contribute $5 billion in cash, satisfying its required obligations until 2021.

The company is also increasing its commitment to initiatives like employee training, charitable contributions for education in science and math, and the Lockheed Martin Ventures fund by $200 million, CEO Marillyn Hewson said on a call.

Lockheed projects earnings will more than double this year to $15.50 a share, buoyed by the U.S. tax cuts and higher deliveries of its F-35 Lightning II fighter jet.

Pharma’s Plans

Merck & Co. expects its tax rate will fall to about 20 percent from 35 percent, providing added flexibility for major capital expenditures, in addition to research and development.

The drugmaker expects to spend $12 billion over five years, including $8 billion in the U.S., with oncology, vaccines and animal health targeted for investment, CFO Rob Davis said on a call. Merck will also pay one-time bonuses to some of its 69,000 employees.

Priorities also include the dividend, business development deals and repurchases, to the extent possible.

Merck finished the year with $21 billion in cash, and plans to repatriate about $17 billion over time. The proceeds will be invested in the company, its dividend, and remaining money will go toward deals and share repurchases.

AbbVie Inc., maker of the top-selling drug Humira, plans to spend $2.5 billion on capital projects in the U.S. as a result of tax reform and is evaluating expansion of its U.S. facilities, according to CEO Richard Gonzalez. The drugmaker also will accelerate pension funding by $750 million and increase non-executive pay, though it didn’t provide details.

AbbVie said on Jan. 26 its tax rate will plummet to 9 percent this year. It was 19 percent in 2017. As a result the company boosted its annual profit guidance to as much as $7.43 a share, a 13 percent jump.

“U.S. tax reform enables more efficient access to our foreign cash, and the ability to deploy it in the United States,” Gonzalez said on the call.

Foreign Companies

Roche Holding AG’s tax rate will drop from 26.6 percent last year to the low 20 percent range. The tax cut means core earnings per share will rise by a high single-digit rate this year; without the reduction, earnings might have been little changed. The drugmaker didn’t announce any increase in investment.

“We do benefit from the U.S. tax reform,” Severin Schwan, CEO of Roche, said in a conference call. “We have been one of the biggest taxpayers in the United States.”

Diageo Plc, British American Tobacco Plc and Societe Generale SA also said the tax law would lower their rates. Lenovo Group Ltd. posted a surprise loss after taking a $400 million charge related to the tax-law changes, while adding that its U.S. operations may benefit from a lower rate in the longer term.

The Big Gorilla

The company with the biggest decision to make is Apple Inc., with a net cash position of $163 billion—the sum of its $285 billion cash hoard and debt of $122 billion. Apple’s aim is to reduce that to zero and will announce more specific plans when it reviews results for the current quarter ending in March, Chief Financial Officer Luca Maestri said on a call.

“When you look at our track record of what we’ve done over the last several years, you’ve seen that effectively we were returning to our investors essentially about 100 percent of our free cash flow,” Maestri said. “And so that is the approach that we’re going to be taking.”

Last quarter, Apple paid $3.34 billion in dividends and repurchased more than $10 billion of its stock.

The company had no difficulty financing acquisitions before tax reform, he said, and doesn’t see any now, either. Apple made 19 acquisitions last year.

“It’s always the customer experience in mind, right, that we make acquisitions,” Maestri said. “We look at all sizes and we will continue to do so.”

—With assistance from Jing Cao, Mark Gurman, Blaise Robinson, Jared S. Hopkins, Julie Johnsson, Caroline Chen, Brandon Kochkodin, Phil Serafino and Scott Moritz

Source: Bloomberg News via Accounting Today