Tax forms, Tax Preparation, Uncategorized

Tax Planning for 2018

As 2018 is rapidly coming to a close we often begin to think about the expenditures over the past year and how these are going to affect our financial future. Tax planning is one of the more optimal ways to see how best you can lower your personal income taxes for 2018 it can help to give you insight on ways to mitigate your tax liability.

There are many changes to the new tax law most importantly of which is the elimination of the personal exemption deductions and the increase in the standard deduction amount.

Standard Deduction Amounts for 2018 Filing Statuses 

  • Single or Married Filing Separately                            $12,000
  • Married Filing Jointly or Qualifying Widow(er)      $24,000
  • Head of Household                                                         $18,000

These changes can affect your return in multiple ways, especially with the increased standard deduction and the reduced usage of itemized deductions, many of which have been eliminated all together. When Itemizing you can still deduct up to 7.5% of your Adjusted Gross Income (AGI) of your medical and dental expenses. State and Local income, sales and property taxes are limited to a total deduction of $10,000 and unreimbursed business and moving expense deductions have been eliminated. Good news is that charitable giving and cash contributions has increased from 50% to 60% of your AGI.

Other Important changes that may affect your tax liability is the increase from $1,000 to $2,000 for the Child Tax Credit and the maximum additional child tax credit increased to $1,400 for this year. To receive this credit it is now required that the child have a social security number not just a tax payer identification number to qualify.

A big misconception about the Shared Responsibility penalty relating to healthcare is that it is eliminated for 2018 filings, this change does not take affect until 2019. The Chart below clearly shows the differences in the change.

Fee amounts for 2018 (you’ll file taxes in April 2019)
Per person method Income percentage method Maximum amount
2017 amount plus any inflation adjustment to be determined 2.5% of yearly household income If per person method is higher: 2.5% of yearly household income

If income percentage method is higher: Total yearly premium for the national average price of a Bronze plan sold through the Marketplace

Fee amounts for 2019 and beyond (you’ll file taxes in April 2020 and beyond)
Per person method Income percentage method Maximum amount
The Shared Responsibility Payment no longer applies The Shared Responsibility Payment no longer applies The Shared Responsibility Payment no longer applies

If you have any questions on how these changes will affect you please give us a call today to schedule an appointment. 970-433-6796

 

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