5 Questions to Ask About Your 2018 Taxes

1. Do I still itemize?

Tax reform nearly doubled the standard deduction to $12,000 for single filers and $24,000 for married couples filing jointly. It also eliminated or changed many deductions. Until you do the math, you won’t know for sure whether itemizing is for you, but tax filing will be simpler if you take the standard deduction. About 30 percent of Americans itemized under the previous tax code; that number is expected to fall to about 10 percent.

For details about what’s changed, check out our Tax Deduction infographic.
 

2. How are families affected?

There’s good news here for families who have children, and for those who are taking care of relatives in their homes.

• The child tax credit has doubled. You can now claim a credit of $2,000 for each child under 17, double the credit for 2017. Of that, up to $1,400 is a refundable
  credit. Why is that important? Even if you owe no taxes, you may be able to collect that amount.
• There’s a new $500 credit for other dependents. To qualify, the dependent must be a 17 to 23 year-old student and living with you more than half the year. There’s also a long list of other relatives who can qualify as dependents including grandchildren, parents, grandparents, siblings and in laws.
• You can use education funds for elementary and secondary school. There are new tax breaks for the popular Section 529 plans, which allow you to build up savings for your kids’ education. Under the previous tax code, you could withdraw to pay for qualified college expenses. Now, you can use up $10,000 a year for tuition at public, private or religious elementary or secondary schools, if your plan allows.

3. I’m a small business owner. What’s in it for me?

If your business is an LLC, S-corporation or sole proprietorship, you might benefit from QBI, the new business deduction. It allows certain small businesses to take a 20 percent deduction against ordinary business income. To qualify without limitations, your taxable income for 2018 needs to be below $157,500 for individuals and $315,000 for married couples filing jointly. For details, check out the QBI Deduction Flow Chart.

Tax Reform Changes for Your 2018 Return: What’s Still Deductible and What is No Longer Deductible?

4. How can I reduce my 2018 tax burden?

Contributions to a traditional IRA are ‘above the line,’ meaning that they will reduce your income even if you don’t itemize. The maximum you can contribute in 2018 is $5,500. If you’re over 50, the maximum is $6,500. Jump on this now; you have until April 15, 2019 to fund your traditional IRA.
 

5. What else should I do?

If you owe more, or if you’re getting a larger refund than in the past, this might be the time to adjust your witholdings in light of the new tax laws. Your CPA can provide guidance so there aren’t surprises next tax year.