The 2017 Tax Cuts and Jobs Act dramatically changed the way Americans handle taxes. In addition to doubling the standard deduction and lowering the deductability of state and local taxes (SALT) funds, other changes exist as well, all of which might affect you come tax time.
These helpful tips might allow you to lower your 2018 tax bill, but you need to act fast in order to take advantage of them.
- Check your withholding – we’ve mentioned in previous posts the importance of proper withholding, but it bears repeating. Using the IRS Withholding Calculator can help you ensure that your withholding is correct, and that you won’t owe money in April. You only have a few pay periods left in 2018 to increase withholding contributions or to pay estimated taxes for fiscal year 2018, so act fast.
- Pay major home expenses ahead if you’re itemizing – if you plan on itemizing your deductions next year, you should strongly consider paying your mortgage and state taxes due before the end of the year. This way you’ll be able to maximize your deduction.
- Review medical bills – this is the last year that non-reimbursed medical bills will be deductible above 7.5 percent of adjusted gross income; for fiscal year 2019, the deduction is only available for expenses above 10 percent AGI.
- Sell losing investments – you’ll be able to offset losses for sales against capital gains on underperforming investments. You can also offset up to $3,000 in income tax for losses you sustain, plus you can roll over additional losses to the next fiscal year.
- Max out retirement savings – you can contribute up to $18,500 to employer-based retirement plans and 401Ks. By maximizing the contribution, you lower your overall taxable income, thus lowering potential taxes due. If you’re over 50, you can also contribute an additional $6,000 in “catch up” funds.
Be sure to check with your tax professional to ensure that you follow this information properly to avoid a potential audit situation.