With so many changes under the new tax reform law, it’s more important than ever to plan for next tax season now. We break down the five reasons to start planning and the moves you can make now to help you save money on your taxes when you file.
Five Reasons to Start Planning
Lower Tax Rates, More Money
One of the biggest changes is the reduced tax rates, about 1 – 3% for the majority of taxpayers so you may be seeing more money in your paycheck.
Elimination of Personal and Dependent Exemptions
Under the new tax law the personal and dependent exemptions of $4,050 were eliminated. If you are married and have a few kids, the elimination of your personal and dependent exemptions can mean a big reduction in the number of write-offs you once had.
Increase in the Child Tax Credit
The new tax reform law increased the Child Tax Credit from $1,000 to $2,000 per child and it raises the income threshold, which means more people could be eligible for the credit. The law also adds a new, non-refundable credit of $500 for dependents other than children.
Changes If You’re a Homeowner
If you are a homeowner or are considering buying a home, some of the changes in the new tax law are very important for you.
As an existing homeowner, you may see fewer tax deductions that lower your tax liability, especially if you live in a state with high property taxes. The new law limits the amount of state and local property, income, and sales taxes that can be deducted to $10,000. In the past, these taxes have generally been fully tax deductible.
Elimination of Tax Deductions
The new tax reform law eliminated several popular tax breaks starting in tax year 2018 (the one you file in 2019) like miscellaneous itemized deductions.
This includes deductions such as job search expenses, unreimbursed work expenses, investment expenses and tax preparation fees, exceeding 2% of adjusted gross income as well as moving expenses.
What You Can Do to Start Planning Now?
Adjust Your Withholding Allowances
Do a paycheck checkup and adjust your withholding allowance.
Reduce Your Taxable Income
You can decrease your taxable income by making smart money moves throughout the year like investing in your 401K or IRA. Also, don’t forget expenses like paying student loan interest can be tax deductible and will decrease your taxable income at tax time.
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