Tax planning can save you money. Tax day may be April 15, but you only have until the end of December to take steps to minimize your 2018 tax bill. Remember, the rules have changed. The new tax law that took effect this year means that the usual tax planning strategies may not work. The biggest change for most people is the amount of the standard deduction. If you have less than $12,000 in itemized deductions - $24,000 for married couples filing jointly – then you will be taking the standard deduction. It is estimated that only 5% of taxpayers will be itemizing this year (down from 30%).
Here are a few strategies to minimize your taxes.
First figure out if you’ll be itemizing. Remember, the cap on tax deductions is $10,000. That includes, state, local, and property taxes combined and is the same for single or joint filers. Add to that: your home mortgage interest, charitable gifts, and medical expenses larger than 7.5% of your AGI. Compare that to the standard deduction amount ($12,000/$24,000)
If you will not be itemizing, like most taxpayers, you will be taking the standard deduction. Focus on “above the line” deductions you can increase now like
· IRA contributions
· Self-employed retirement account contributions
· Health Savings Account contributions
If you will be itemizing
· Plan for limited deductions compared to last year
· Make your charitable contributions before the end of the year
· Don’t pre-pay your taxes if you are already at the $10,000 limit
If your total deductions are close to the standard deduction amount, alternate. Take the standard deduction one year, then pile all your charitable contributions into the next year and pre-pay your taxes that year too.
It’s worth staying one step ahead of the tax man. If you have question about tax planning, please contact us and we can help you make the right moves.