December 10, 2018
With the 2019 tax year looming on the horizon, you’re probably already thinking about preparing for this time to try and get the maximum out of the changes that were introduced with the TCJA, or Tax Cuts and Jobs Act. Credits have been adjusted, exemptions and tax bracket have altered, making it the perfect time to take a step back and look at your finances before the end of the fourth quarter. Keeping that in mind, here are just a few intelligent money manoeuvres to think about before December 31st, that could help you stay a step ahead of the tax filing season:
Adjust your withholdings:
The advice from certified financial planners and advisors alike, is to take the crucial step of adjusting your withholdings, as the TCJA made a whole host of changes that have a direct impact upon tax liabilities. Some of the changes include eliminating the personal exemption, a higher amount of the child tax credit and an increase on standard deductions. As a taxpayer, business or individual, you may want to adjust your W-4 to make the most of your tax withholdings.
Wherever possible, group your deductions:
The new tax law has seen an end or at the very least a limit, to many itemized deductions, so as a taxpayer, your credits and tax breaks may vary greatly. At the beginning of 2018, a great many taxpayers who claim itemized deductions every year, may find that they’re no longer able to do so, as a direct result of increases to the basic standard deduction: $24,000 for those who file jointly, $12,000 for single filers, $18,000 for household heads and $12,000 for married couples filing separately. Many itemized deductions have also been cut back significantly or been abolished altogether.
Pay off nonqualifying home equity loans:
The interest on a home equity loan was once deductible, and so in the past, having one was an effective tax reduction strategy. Now, however, this is no longer the case, and mainly because the new stipulations make it extremely tough to be eligible. Now, the only instance in which a deduction is permitted, is if the loan was taken out to buy, build or improve the home.
The best way of making sure that you fully understand your tax situation and that you can conform with the changes to the law, is to consult with a tax professional, this is especially useful if your financial situation is not straightforward. Guessing your way through your tax return is the quickest way to land yourself with a penalty, or to miss out on a refund because you didn’t fully understand the new tax law.
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