CPA Dave Young said start your tax planning now Monday during News 8 at Sunrise.
He said the starting place is to consider the implications of the Tax Cuts and Jobs Act now that we have a year under our belt. “Remember our standard deduction is much larger,” said Young. “We got rid of the personal exemption. The tax credit for your child went up from $1,000 up to $2,000, assuming the child is 16 or less. But there’s a lot of itemized deductions that have been gotten rid of – so there’s no miscellaneous itemized deduction, for example. The biggie is your SALT, State And Local Income Taxes, capped at $10,000. It effects a lot of the people listening today.”
Young said you’ve got to look at your withholding first. “This is the mid-year. Look at your withholding. Make sure it’s pretty close to where it needs to be. Run a tax plan with yourself or with your CPA. We saw a lot of people last year who did not have enough withholding. The tables changed, and that could’ve continued on this year. So if you under withheld, you still have the time to adjust.”
He added, “The other thing to think about is, with the larger standard deduction, this is a year when you may want to bunch up your expenses. Maybe to take a standard this year or pull some of your itemized deductions into this year. Itemize this year, take a standard next year. So these are things to sort of think about now.”
Two things to think about right now are the Child Tax Credit and Dependant Tax Credit. “That Child Tax Credit is pretty big now – up to $400,000 in income – so a lot more people will get that,” said Young. “The key is when your child turns 17 it goes from a $2,000 credit to a $500 credit. But if you’re taking care of a parent you’ll still get a $500 credit for that, so keep that in mind. If you use an outside preparer you’ll have to show proof that the child is actually your child because the government does not want to give the credit to people who don’t deserve it.”
When it comes to SALT deductions, Young said it’s important to keep in mind that New York State decoupled. “So what we saw last year is – oh, I’m going to take a Standard Deduction – so I don’t have to keep track of all of my expenses. Well SALT is one of them where if you have high real estate taxes you might actually take a Standard on the federal and itemize on the State, so keep that in mind. And the same thing is true for your charitable contributions. You might not have enough to itemize on the federal but you may end up itemizing on the State, so keep that in mind. A lot of people did not keep track of all of their charitable contributions this year. They said, well I’m going to take the Standard Deduction. That’s true on the federal, but not so true on the State. That’s the biggest thing that people really did not pay attention to last year.”
For more ‘Smart Money’ advice visit the New York State Society of CPAs at nysscpa.org/getmoneysmart.