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Although not common for most, the start of the new year reminds me of one thing… tax season! With our second post-2018 tax reform around the corner, it’s important to identify and take advantage of proactive tax strategies available. There is never a bad time to prepare for future tax liability. As you begin the start of 2020, consider my “ABCs” of common tax planning tips explained…
The tax law changes that went into effect in 2018, changed many things but tax planning moves are still available that can be implemented before the end of the year that can reduce your taxes in 2019. Whether you are self-employed or a W-2 employee, there are strategies available now that can reduce your tax bill if you act before the end of the year.
When Congress passed the recent $1.5 trillion tax bill (The Tax Cuts and Jobs Act or TCJA), it triggered the first comprehensive revamp of the U.S. tax code in more than three decades. As we prepare to file our 2018 tax returns, Americans will feel the effects of this legislation for the first time. For most, the effects will be positive. In fact, 80% of Americans will see their taxes drop. However, not all the news is good. There will be inevitable surprises as 2018 taxes are filed with one particularly nasty “gotcha” that will likely catch many taxpayers off guard.
The Tax Cuts and Jobs Act, passed in December of last year, fundamentally changes the federal tax landscape for both individuals and businesses. Many of the provisions in the legislation are permanent, others (including most of the tax cuts that apply to individuals) expire at the end of 2025. Here are some of the significant changes you should factor in to any mid-year tax planning. You should also consider reviewing your situation with a tax professional.
Fiction: If you’re on the threshold of a tax bracket, you should stay on the higher end and enjoy the higher-income status.
Fact: If you’re on the threshold of a tax bracket, deferring income or accelerating deductions may help you reduce your tax exposure. It might make sense to defer some of your income to the next year if doing so will put you in a lower tax bracket. Accelerating deductions, such as medical expenses or charitable contributions, into the current tax year may have the same effect.
At the end of March, the Federal Open Market Committee (FOMC) announced that it was increasing the fed funds rate by 0.25%. This rate, which is also known as the “overnight rate,” is the rate at which depository institutions (banks and credit unions) lend reserve balances to other depository institutions overnight on an uncollateralized basis so that those institutions can meet their reserve balance requirements. The general consensus is that this increase is the first of three this year although some analysts think there could be as many as four rate hikes in 2018.
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