More Gain, Less Pain
After months of planning, prepping, and tallying, this year’s tax season is in the books! It was a distinctive season as the Tax Cuts and Jobs Act reform managed to impact almost every household and business tax return. With the major changes in tax rules for this filing season, tax payers and professionals alike are still scratching their heads a little at how everything turned out. Since practice makes perfect, a few take-a-way’s for next year may come in handy.
Even though Tax Season 2020 is a year away, it’s not too early to get ahead of any issues and adjust your tax strategy now. Possibly due to changes in the withholding schedules, many taxpayers had less money withheld from their paychecks in 2018. Although this meant more money in the bank account, changes to tax deductions also meant some taxpayers owed more money than in previous tax seasons. Luckily, the IRS has a Withholding Calculator for individuals: https://www.irs.gov/individuals/irs-withholding-calculator to do a “paycheck checkup”. The calculator will help ensure the proper amount of tax is withheld and hopefully avoid any surprise tax payouts next year.
Even without a change in family circumstances or a shift in income, the new tax laws may still affect certain credits, exemptions, or deductions and impact taxable income. Most, but not all, people qualify for the standard deduction, which is the IRS portion of income not subject to tax and is based upon filing status, age, disability, and claimed dependents. For 2018 taxes filed on April 2019, standard deduction amounts nearly doubled over previous tax seasons. For tax payers over 65, single or a head of household, along with married filers with at least one spouse over 65, standard deductions increase by $1,600 or $2,600 respectively.
Alternatively, itemized deductions allow tax payers the option to calculate all tax-deductible expenses throughout the year including property tax, medical expenses, and charitable donations that may influence bottom line taxable income. If total itemized deductions are higher than the standard deduction, this would be the preferred option, but is sometimes harder to calculate every possible expense. With the higher standard deduction and itemized deduction maximums capped, fewer may be able to use itemization as an option.
Whichever option you chose, it’s never too early to do a pulse check. Ideally, contact your tax professional in June/July to review mid-year deductions or itemization records and make educated projections for the second half of the year. Based on the 2018 tax season, most tax payers should consider some adjustments to their 2019 tax strategy. Getting a jump start now on your goals may prevent future pains and increase gains come next season!
By Susan Amsler
May 13th, 2019
Randolph Business Resources, LLC.
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