As we shared this winter in an article called Why Is Your Tax Refund Smaller for 2018 (written by Shira Schoenberg and including quotes from Andrew Schwartz CPA), many individuals were surprised that they had smaller tax refunds or owed more in federal income taxes than they had expected in connection with filing their 2018 tax returns.? What many taxpayers didn’t notice, however, was that the total federal income taxes they were paying went down as well in most cases.
That was due to the passing of the Tax Cuts and Jobs Act of 2017 (TCJA) at the end of 2017. This new tax law is considered to be the largest tax reform in 30 years and most individual taxpayers would be impacted beginning with the 2018 tax year.
As part of passing these new rules, the withholding tables were adjusted to give taxpayers access to their lower federal taxes sooner, but ended up reducing the withholdings by more than most taxpayers would save.
The new legislation brings a variety of changes to everyone’s tax planning.? Some concerns you may have with the new tax law include:
- How does the new tax law impact my mortgage interest deduction?
- Can I still deduct my charitable contributions?
- How am I affected by the new AMT thresholds?
- Will I be itemizing my deductions given the new SALT (State and Local Taxes) limitation?
- How does the new pass-through deduction available to Sole Proprietors, S-Corp Shareholders, and LLC Members impact me?
- Are my tax withholdings on my 2019 paystub properly adjusted for the new tax rates?
We strongly believe that tax planning is not just a year-end activity conducted when preparing your tax returns.? Given the issues with the TCJA passed more than a year ago, tax planning should be given a higher consideration and provided at an earlier point in the calendar year than in pre-2018 years.
There are numerous planning opportunities and recommendations available to you now to address these new rules before the end of the year. Some areas of focus with your 2019 planning include: setting up a donor advised fund for your future charitable donations, maximizing retirement plan contributions, adjusting tax withholdings, installing solar panels, in addition to other planning moves to consider.