Tax planning should always be a key focus when reviewing your personal financial situation. One of our goals as financial professionals is to point out as many tax savings opportunities and strategies as possible for our clients.
Tax Law Updates: For 2018, the form 1040 has been completely redesigned. Form 1040, which many taxpayers can file by itself, is supplemented with new Schedules 1 through 6. These additional schedules will be used as needed to complete more complex tax returns. Forms 1040A and 1040EZ are no longer available.
Income Brackets: There are still seven federal income tax brackets for 2018. The lowest of the seven tax rates is 10%, while the top tax rate is now 37%. The income that falls into each is scheduled to be adjusted in 2019 for inflation.
Standard Deductions: Some deductions and exemptions allowed in previous years are now eliminated. In the past, those who used a standard deduction could also include a personal exemption if they were not a dependent. That personal exemption is no longer an option. Also, deductions for interest on home mortgages have been reduced and interest from home equity loans eliminated.
There are also changes to state and local tax deductions. Under the new law, a taxpayer’s state and local tax (SALT) deduction is limited to $10,000. This includes both state income and property taxes.
Retirement Accounts: If you haven’t already funded your retirement account for 2018, consider doing so by April 15, 2019. That’s the deadline for contributions to a traditional IRA (deductible or not) and a Roth IRA. However, if you have a Keogh or SEP and you get a filing extension to October 15, 2019, you can wait until then to put 2018 contributions into those accounts. To start tax-advantaged growth potential as quickly as possible, however, try not to delay in making contributions. If eligible, a deductible contribution will help you lower your tax bill for 2018 and your contributions can grow tax-deferred.
Filing your 2018 taxes will include many changes from previous years. The new tax rates and many of the changes that were approved are set to expire after 2025. An essential part of maintaining your overall financial health is attempting to keep your tax liability to a minimum. Managing wealth involves careful planning and keeping updated and informed of any changes that affect investors. When filing your 2019 taxes, the rules and laws currently in place do not vary too much from your 2018 taxes.
This report reviews some of the broader tax law changes along with a wide range of tax reduction strategies. As you read this post, please take note of each tax strategy that you think could be beneficial to you. Not all ideas are appropriate for all taxpayers. We always recommend that you address any tax strategy with your tax professional to consider how one tax strategy may affect another and calculate the income tax consequences (both state and federal). Remember, tax strategies and ideas that have worked in the recent past might not even be available under today’s new tax laws. Always attempt to understand all the details before making any decisions—it is always easier to avoid a problem than it is to solve one.
Our full report, including overlooked tax items and deductions and seven helpful tax time strategies, is available by contacting our offices at: 908-379-2706. We will be happy to forward you our complete report.