Yes, you’re knee-deep (or higher) in holiday preparations right now, and you think you can’t squeeze one more thing into your schedule. But Billshark wants you to know that you really should try to make time to think about taxes.
Tax season is next spring, but now is the time to make last-minute moves to minimize your 2018 taxes. Because the tax year runs from January 1st to December 31st, whatever you do before New Year’s Eve can impact what you get back—or have to pay—in April. And with the next tax law (the Tax Cuts and Jobs Act) already in effect, you can’t count on things being the same as they were last year. In fact, many of the moves you were able to make in the past during the waning days of each tax year may not do you any good this year, because so much is different under the new law.
So here’s what changed and didn’t, and how you can take advantage of the changes.
- Standard Deduction
Those who have itemized in the past might want to rethink that, as the new law almost doubles the standard deduction: $24,000 for married couples (up from $12,700), $12,000 for singles (up from $6,350), and $18,000 for heads of households (up from$9,550).
While that sounds very generous, many of the previous deductions that would have helped lower your tax bill have been reduced or dropped altogether. These include job-related moving expenses (except for military personnel), various job expenses (e.g., license fees, clothing, tools/equipment, continuing education, and medical tests), fees for tax preparation, and various investment-related fees.
- Personal Exemption
The old personal exemption deduction has been eliminated. This exemption previously allowed you, your spouse, and each dependent to claim a $4,050 deduction on your return. This will make a big difference to families with several children, but not so much for those who are single or couples who are childless.
- SALT Deduction
One of the most-often used deductions for those who itemize is also now restricted: SALT. That is, the State and Local Taxes Deduction, which allowed you to deduct your choice of either state and local income taxes or property and sales taxes. Previously unlimited, these deductions are now allowed only up to $10,000.
- Charitable Contributions
The deduction for charitable contributions remains unchanged. Remember that the fair market value of goods is also deductible, so think about clearing out your garage and closets and donating those items as well. And if you donate to a charity on a credit card by 31 December, you can still deduct the full amount this year, even if you don’t pay it off until next year.
- Medical Expenses
For this year (2018) only, you can claim medical expenses that exceed 7.5 percent of your adjusted gross income (AGI). The old ceiling was 10 percent and will be again beginning in 2019, so if you’re nearing this threshold for the year, it makes sense to spend as much as you can on medical expenses before the end of the year.
- Child Tax Credit
If you have children, you’ll make out better under the new tax law. The 2018 tax credit is now $2,000 per child under 17 (up from $1,000), with $500 for dependents who do not qualify for the $2,000 credit.
- Alternative Minimum Tax
If you make enough money to be affected by this tax ($109,000 for joint filers and $70,000 for singles), you’ll benefit this year by the new law, which raises the limits from $84,500 and $54,300, respectively.
- Home Mortgage
Unless you bought a house for $750,00 or more this year, the changes in this category won’t impact you. That’s the new limit for deducting interest on home loans. Previously it was up to $1 million, which still applies if you bought your house prior to 2018.
A good way to take advantage of this deduction is to make an extra mortgage payment on or before 31 December, which allows you to claim that interest on this year’s taxes.
- HELOC Deduction
One change that will affect existing homeowners applies to those who have a home-equity loan or line of credit (HELOC). The interest on such loans is no longer deductible.
- Casualty and Theft
This deduction is gone, unless you suffered the loss in a federally declared disaster, which means one so designated by the president.
So while there are some steps you can take to minimize your 2018 taxes, there are fewer available to you than before, so it pays to act on the ones you can while you still have time.
And meanwhile, let Billshark find you hidden savings in all your bills. You’ll be surprised at how much we can save you.