The taxman cometh because, as we all know, the only thing that’s certain is death and taxes. And while not being prepared and procrastination can, indeed, make tax season a miserable thing, it doesn’t have to be that way. Do your research and legwork now so come April you’ll be feeling fine instead of frenzied. Arming yourself with information has never hurt anyone, particularly when it comes to understanding the nuanced and dynamic tax laws. Read on for seven need-to-know tips regarding the 2018 tax season.
1. Be Aware of the Change in Charitable Deductions
While it might sound Machiavellian to say that you can make money off your charitable donations, it’s the plain truth. And if you don’t take advantage of it on your taxes, you’re leaving money on the table. Besides, who says doing a good thing can’t be good for you, too? The new tax bill provides a larger financial benefit come tax time. As this Fox Business article notes, “Under the new tax bill, deductions can be made by an individual taxpayer to public charities of up to 60% income, an increase of 10 percentage points over the previous allowance.” The change allows for some taxpayers to save a decent amount of money this year.
2. To Itemize or Not to Itemize—That is the Question
In previous years, anyone who can itemize and benefit from deductions would do so. However, this year might be an exception, because the standard deduction limit will increase to $6,300 this tax season. It’s quite possible that you won’t reach this amount and could end up owing the IRS if you choose not to claim the standard deduction.
3. Business Owners Need to Smarten Up on Deductions
Whereas this might be a good year for the average individual not to itemize a bunch of deductions, business owners can and should do so. In fact, the IRS encourages business expenses be claimed for: mileage and car repairs, business supplies, company-related travel, home office expenses, and lodging an entertainment expenses related to your business. Hopefully this means you’ve kept meticulous track of your receipts and will continue to do so.
4. Review Your W-4 for Changes
A loss of a family member is excruciating and, on top of that, this loss needs to be addressed when doing your taxes. If you have lost a family or family members this year make sure to review your W-4 with your employer to make note of the changes.
5. Consider Hiring a Tax Professional
This isn’t a tax tip for 2018, per se, but more of a general word of advice. If you are single, don’t have kids, and don’t own your own business, chances are your taxes are straight forward enough that you could do them on your own. However, if you have no idea what you are doing and/or your taxes are complicated due to the factors mentioned above, it’s best to leave your tax filing to a pro. You pay up front, but what they can save you in terms of mistakes you might make on your own is no insignificant amount.
6. Get Organized as Early as Possible
Tax Day may be in April but good organization is the key to maximizing tax benefits, so get your ducks in a row now. Gather those (meticulously organized!) receipts. Go in search of any forms you might be missing, such as emails sent from professional organizations with proof of your charitable donations. Hopefully you have a file going with any credit card e-statements, retirement account expenses, business expenses, and more. Make sure this is ready to go for your tax professional, and keep a keen eye on any tax deadlines you don’t want to miss.
7. Avoid That Mortgage Refinance
As the previously mentioned Fox Business article points out, any mortgage that originated after December 13, 2017 is subject to home acquisition indebtedness rules which have recently changed. Whereas the previous tax code allowed homeowners to deduct mortgage interest on up to $1.1 million of debt, the new law limits this to the first $750,000 in debt. This equates to a loss of about $3,100 for you, so 2018 is not likely the year for refinance.
If you’re looking for more information and tips on tax filing for 2018, go here. Don’t make tax season a source of dread this year. Get organized and get ahead by following these tips and you’ll be welcoming the taxman instead of hiding.