There’s only about two months left in 2018, and soon Americans will be filing their 2018 income taxes based on the new regulations of the Tax Cuts and Jobs Act.
Proposed last November and signed by President Donald Trump right before Christmas of 2017, the Act called for significant tax reform. And while we’ve already covered a lot of the basics, it’s worth revisiting some of the significant changes from an individual standpoint. With the end of the year coming up quickly, now’s the time to reassess where you stand so that there are no surprises come tax time. Here’s a closer look:
The Major Changes
First, let’s recap some of the major changes as a result of the Tax Cuts and Jobs Act that will impact individuals:
- The standard tax deductions have all about doubled. This means that the standard deduction for individual filers is now $12,000 and for joint filers $24,000. As a result of this increase, many filers won’t exceed the standard deductions, and therefore not even bother itemizing deductions. As a result, they’ll just take the standard deduction.
- The IRS and U.S. Department of Treasury updated withholding tables for the taxes that are taken out of your paycheck last winter.
- You can’t itemize certain deductions, such as non-reimbursed employee expenses or tax preparation fees, any longer.
Where are You at?
Now that we’ve gone over some of the big changes from the Tax Cuts and Jobs Act, it’s time to assess your situation.
The biggest thing you want to be aware of is your withholdings, especially since the IRS and U.S. Department of Treasury updated the tables. When the change occurred last winter, you likely saw your paycheck go up by a little bit.
You may have even changed your withholdings to better reflect your situation. However, a recent report from the Government Accountability Office reveals that more than 20 percent of all filers – or about 30 million people – aren’t withholding enough from their paycheck. If this is the case, they could be in for a rude awakening when it’s time to file this winter. Here’s how to tell if you’re among those not paying enough taxes:
- Pull your pay stubs from a year ago.
- Compare the amount that was withheld then to what is being withheld now on your latest check.
- If your pay is the same, but your withholdings are less than they were a year ago, that’s reason for concern. However, if both your pay and your withholdings are the same – or similar – then you’re good to go.
Remember, ideally you want to withhold just enough taxes where you don’t have to pay any more upon filing, yet aren’t giving an interest-free loan to the government and settling for a hefty return. If you’ve discovered that you’re not withholding enough money, make the change in your withholdings right away so that you don’t fall into the same trap next year.
Shrinking Your Tax Bill
There are a few other things you might consider before year’s end, especially if it can help you get over the standardized deduction limits by itemizing. Here’s a look:
- Double your charitable giving: Consider giving double the amount to charity that you normally do each year, and then don’t make a charitable donation in 2019. You’ll still be helping the charity as much as you intend, but all at once instead of by individual year. It still helps the charity, and can help you get over the standardized deduction hump.
- Try making it up for it in other ways: Aside from just setting aside more money from your check yourself to settle your shortage come filing time, there are a few other things you can do. For instance, you can claim losses and expenses from any other business you do, like driving an Uber or selling art on the Internet.
November is here. Now’s the time to give yourself a tax check-up in lieu of the new regulations. Where do you stand?