2018 Tax Law Hacks For You

It's that time of year once again—you're probably digging through piles of papers trying to find old receipts for 2017 tax purposes. Your 2018 taxes aren't even in your periphery at this moment, and why would they be? This tax season may take priority right now, but there are good reasons to think ahead to the 2018 tax year. There are big changes ahead for tax laws in the coming year, and you can get ahead of them, possibly gaining an edge or a break on your next taxes. 

The new Tax Cuts and Jobs Act was officially made law in December of last year. Current President Donald Trump promoted the bill as one that made existing and new tax codes simply enough for anyone to understand. The changes were supposed to make taxes so simple, in fact, that he said one would be able to file their taxes on an index card. 

While it is unlikely that any new laws will make taxes that easy, it is almost a certainty that the recent stipulations will affect millions of people across the nation. That's why making a plan now can be a big help to you, as you'll be able to maximize your returns and mitigate risk. 

One of the biggest changes is how the standard deduction is handled. This deduction is nearly double what it was before, with both single and joint filers getting $12,000 and $24,000 in deductions, respectively. The government expects fewer taxpayers than before to itemize thanks to this increased limit, but a qualified pro can help you decide if itemizing is still right for you. 

Change Withholding Allowances

Check your latest W-4 form as soon as you can. This is the form that lets your employer know how much to withhold from your paycheck for tax purposes. Personal exemptions will no longer be valid under the new law and if yours aren't adjusted, your employer may take less than they should. You don't want to owe more in lieu of getting a refund. 

Plan Medical Procedures for 2018

There are also changes to medical deductions. If you spend more than 7.5 percent of your gross income for 2017 or 2018 on medical expenses, you can deduct those costs from what you owe. Although elective procedures are not covered, you can deduct things like travel costs to specialists' offices. 

Consider Private Education

The new bill expands on plans that allow families to pay for privates schools starting in kindergarten and going up through college if necessary. However, personal spending has a cap of $10,000 annually. More than half of the states in the U.S. allow for deductions if you invest in one of the private plans. However, keep in mind you can't deduct what you invested from your taxes. 

Invest in Charity

If you want to maximize charitable donations, consider using a fund that directs donations toward taxpayer charities or a donor fund. The only caveat is that most of the investment firms require at least $5000 up front. However, you can make monetary gifts that lower your taxable income, giving you a much-needed break. Anyone over 70 can make IRA contributions to charity directly, a provision that remains unchanged from last year. 

Take Stock of your Home Equity Loan

Under the old law, a homeowner was able to deduct the interest on their home equity loans regardless of how they utilized the loan. However, this is no longer a valid option under the new law. The only deductions of this category you're allowed to make relate to acquisition indebtedness. What that means is any interest you accrue on an equity loan you needed to buy, construct, or make changes to a home is deductible. However, if you used an equity loan on your home to help pay off other debt, it's a good idea to take a look at that loan and how the new terms affect it. Experts recommend working with a financial advisor to take stock of your cash and other investments. It's a good idea to pay off an equity loan prior to the next tax season if you have other investments.