Life after Tax Reduction Act is possible! But, life has changed! What we have been doing to reduce our taxes mostly won’t work anymore. You used to itemize and save many taxes on your return, but now most of those deductions you are used to are gone.
THERE IS A WAY TO SAVE TAXES, HOWEVER! But to do so, you will need to add something to your tax planning strategy – A PROPERLY CRAFTED BUSINESS OR BUSINESS ENTITY. The current administration desire to bring businesses back to the US and so are allowing, sometimes, even better deductions and credits than before. You can reap the benefits from these changes if you are smart.
I would suggest you read the blog so you can see why it important for you to DO SOMETHING now if you don’t want to be shocked by your tax bill next year, however, if you desire, feel free to skip down to the end for your FREE OFFERS to take advantage of them now!)
First, let’s talk about some of the changes you may need to make in your tax strategy to save taxes for 2018 and beyond. Then we will touch on some methods to save some taxes by using a business entity.
Individual Taxpayer Deductions
First, you need to understand that the Standard Deduction (the amount you can make before having to pay taxes) is increased to $24,000 (up from $12,700) for taxpayers filing jointly and $12,000 (up from $6,350) for taxpayers filing single. The increased deduction is effective for 2018 through 2025.
The Standard Deduction
“Under United States tax law, the standard deduction is a dollar amount that non-itemizers may subtract from their income before income tax is applied. Taxpayers may choose either itemized deductions or the standard deduction, but usually choose whichever results in the lesser amount of tax payable.” Thus, it would seem that the Federal Government is monetarily “encouraging” personal tax payers to not itemize deductions.
So what deductions have been eliminated or changed? Well, here a sampling:
State and local income taxes, sales tax, real estate and personal property taxes are all grouped together and deductible up to $10,000 per year in total. Previously there was no limit to the deductions.
For mortgage debt on personal residences originating after December 15, 2017, interest is deductible on principal up to $750,000. Mortgages in place prior to that date retain deductions for interest on up to $1,000,000 of principal. Be aware that Mortgages on up to two personal residences can still be deducted, but only under the total principal limits. Additionally, deduction for any home equity debt interest is suspended.
Medical expenses are deductible as an itemized deduction only for any portion that exceeds 7.5% of adjusted gross income, regardless of the taxpayer’s age.
Cash charitable donations are limited to 60% of adjusted gross income, increased from 50%.
No deduction is allowed for donations to higher education institutions when, in exchange, the payor receives the right to purchase tickets or seating at an athletic event.
Qualified Charitable Distributions, which are distributions from a qualified retirement accounts directly to a charity by taxpayers over 70.5, remains unchanged and available only up to $100,000. I believe that this method of charitable donation will become more and more valuable as more and more of us are forced to itemize our deductions and are unable to deduct cash or property donations.
Miscellaneous itemized deductions are suspended. These include tax preparation fees, unreimbursed employee business expenses, investment expenses, professional and union dues.
Deductions for casualty losses disallowed unless originating from federally declared disaster areas.
Expenses for a work related move are no longer deductible, neither are qualified moving expenses, even if paid by an employer, nor are they excluded from the employee’s gross income.
Overall limitations to itemized deductions are repealed by the Tax Deduction Act.
Payment of alimony pursuant to a divorce decree is not deductible by the payor for divorce or separation agreements executed after December 31, 2018. Income and deductions related to agreements exiting prior to that date will not be affected.
Deduction’s for activities which are considered entertainment or recreation are no longer deductible. Previously 50% of these costs were deductible.
The Child Tax Credit will increase from $1,000