The last quarter of any year is a busy one for anyone who wants to get a jump on tax planning and preparation. With holidays and shopping competing for your attention it’s easy to lose your focus on long-range financial planning. However, for those who can set aside time to review their finances, the advantages gained are many.
The end of the year is one of the best times to review your finances, prepare your tax documents, and make any changes to your financial strategy. The changes in the tax code as a result of the Tax Cuts and Jobs Act of 2017 will apply to 2108 tax returns. How you may or may not benefit is dependent on your type of income and deductions. Year-end evaluation and planning with an experienced advisor can help you take full advantage of tax reform.
Planning and preparation can reduce your individual tax bill in 2018 and avoid surprises heading into 2019. Here are six areas to consider:
W-4’s Withholding Amounts
Under the new tax code, your ideal withholding amount may need to be revised. For example, the elimination of the personal exemption, the increased standard deduction, and the higher child-care credit may impact your withholding amount. Your CPA or tax preparer can help you match your expected tax obligations to your withholding before the end of the year.
Tax-deferred Retirement Plans
You can maximize your retirement plan contributions before year-end. In 2018, you can contribute up to $18,500 to regular 401(k) plans. If you are 50 or older, you can also contribute an additional $6,000 as a “catch-up” contribution
Flexible Spending Accounts (FSA’s)
Remember, funds not used by the account deadline will be lost to the taxpayer. Make sure to review the balance and schedule covered appointments and purchases before the deadline.
Taxpayers can deduct up to $3,000 ($1,500 for married filing separately) of their excess losses, which reduces overall income. Moreover, selling stocks that were a loss can offset any sales that resulted in again.
Qualified Tuition (529) Plans
Before the Tax Cuts and Jobs Act, earnings in a 529 plan could be withdrawn tax-free only when used for qualified higher education. Under the Tax Cuts and Jobs Act, 529 plans can now be used to pay for tuition at an elementary or secondary public, private or religious school. The limit is $10,000 per year.
Home Equity Debt Interest
Recent guidance from the IRS indicates that interest paid on home equity loans and lines of credit are deductible under certain circumstances. Funds used to buy or substantially improve the home that secures the loan are treated as home acquisition debt subject to the new $750,000/$375,000 limits. This is good news for homeowners, but it requires careful and complete record keeping.
There are numerous other changes to the tax law that affect both individual and business filers. It is wise to consult with your CPA or tax advisor to clarify your particular situation and make tax planning an integral part of your long-term financial planning.
Charles P Myrick CPA offers tax preparation services for individuals using a process that combines smart, personalized planning with annual tax preparation and filing. Our job is to help you know about all the available tax opportunities that meet your individual needs and circumstances. We work closely with tax lawyers, and investment advisors to ensure that all the details are legally sound, technically accurate, and working to your maximum benefit. Contact us to learn more: (202) 789-8898