Five Planning Tips to Help you Benefit from Tax Reform:

  1. Consider adjusting your withholding and estimated tax payments.  No one likes surprises when it comes to their tax bill.  With the many 2018 tax law changes, it’s important to revisit how you are withholding taxes from your paycheck.  The IRS has revised its withholding tables based on the new tax laws, and taxpayers should consider updating their Form W-4.  Also, explore other tax savings deferral opportunities that are provided by your employer, such as increasing the amount you are deferring into a 401(k), HSA or FSA.

  2. Consider “bunching” certain expenses so you’re able to maximize tax benefits.  The standard deduction is now double what it used to be, and millions of taxpayers will no longer itemize their expenses.  This means certain taxpayers will no longer receive a tax benefit from deductions they used to regularly claim.  However, with some careful planning, you can still see benefits from some of your old deduction acquaintances.  For example, consider bunching your donations into one tax year so that you reap the tax benefits of those gifts.  Instead of donating every year, you might give a larger amount every other year.  This may result in itemizing in one year and taking the standard deduction the next.

  3. For small business owners, understand the new deduction for qualified business income.  There is a new deduction that allows owners of sole proprietorships, S Corporations and partnerships to deduct up to 20 percent of their business income.  There are many complexities associated with this new deduction, including limitations and income phase-outs.

  4. Consider paying down your home mortgage and home equity loans.  Because of the increased standard deduction, some taxpayers will no longer receive a tax benefit from the mortgage interest paid on their home.  Additionally, you can’t deduct interest paid on your home equity loan or line of credit if the money was used for purposes other than buying or improving your home.  Now is a good time also to pay attention to your interest rates and start paying off debt.

  5. Talk to your CPA.  Your CPA can help you to navigate the constantly changing and complex tax laws.  CPA’s must comply with extensive education and experience requirements, making your CPA a key part of your financial team.

 

Matthew R. Horowitz, C.P.A.
(410) 312-7622 • email
10015 Old Columbia Rd. Suite B-215, Columbia, Maryland 21046