5 things I do now to prepare for tax season
I have been doing my taxes ever since I was 18 years old. What is really different now is over the years I was trying to figure out how to optimize my taxes. I finally got a good grip on them a few years back. When I was younger I used to do my taxes for the purpose of filing them. Now after years of educating my self, reading, and learning the ins and outs of tax filing I realized I was leaving money on the table or sometimes not fully taking advantage of all the tax laws that were out there. Now as tax season approaches I have established a routine to prepare for the upcoming tax seasons. Here are 5 things I do to prepare for the tax season:
The tax laws change constantly so it is important to keep up with them. This year is a very important year to make sure you are aware of the changes that have taken place.
1. Lower your tax rate
This year there is a new tax law that will impact what you need to have withheld from your paychecks. Recently tax rates were reduced between 1-3% what does this mean to you? Well, you should be noticing more money going to your paychecks. The IRS changed the withholding tables that employers use to determine the correct withholding amounts they switched the tables to more simpler tax situations. You may not notice these if you take the standard deduction, but if you have a more involved tax situation that involves itemizing your deductions then you will realize these changes. The problem here lies in your W-4 withholding forms, this form alone is confusing to use; I think people get the wrong information and listen to others as they enter their personal w-4 information mistakenly throwing your taxes all out of the loop. Don’t overlook this form and spend the time to make sure you go this part down right. It is important to figure out your withholding as this has taken me a few years to figure out my personal withholding to maximize and optimize my income taxes at the end of the year. Want to boost your next income tax refund? Use this updated TurboTax W-4 Calculator
2. Eliminate your exemptions (personal & dependent)
The new law eliminates the old dependent exemption that used to be $4,050. What does this mean to you? Well if you're married a small family the elimination of personal and dependent exceptions means a reduction in the amount of write-off’s you used to have.
3. Homeowner changes
If you are a homeowner you will be seeing fewer tax deductions that will help lower your tax liability. The new law limits the amount of state & local property, sales, and income taxes that can be deducted. Before all these taxes would have been fully tax deductible. They are trying to push everyone to take the standard, I heard this on talk radio on the way to work. You can try to do it the manual way and itemize but what is going to end up happening is that the IRS has worked it out that both the standard and the long way will pretty much be the same. What has happened here you ask? Well, the IRS has doubled the standard deduction. I have always used TurboTax, don’t worry if you don’t know which way you should go, the software will ask you a few questions along the way it will determine if you should take the standard or it will encourage you or give you an option if you would like to try itemizing.
4. Tax deductions here today, gone tomorrow
This year with the new tax reform law it has eliminated popular tax breaks we all took for granite if you itemized you will recognize that they will not be on there this year when it comes to doing your taxes. Miscellaneous itemized deductions are gone in this category the following are no longer available: job search expenses, investment expenses, tax preparation expenses, un-reimbursed work expenses, and moving expense.
5. What I start doing now
I always make sure to make any adjustments to my withholdings. Use the new TurboTax Caster to see how the new law will impact me. I also work on ways to reduce my income. As I got older and messing around with my income was a scary feeling, but now as I learn ways to go about this it has been a life-changing thing for me to do now. What am I talking about you ask? You can start by decreasing your taxable income and moving your money around. Increase your contributions to your 401(k) or IRA’s, another interesting way to go about this too is to pay off expenses like loans interest can be tax deductible, this can help decrease your taxable income. I don’t mean to scare you and you don’t have to know everything about the new tax laws, software like TurboTax will help you along the way.
If you live in the greater Austin Texas area and would like help on getting your personal finances lined up for you and your family feel free to contact me. I don't do taxes my expertise is in financial advising and I can help create a personal fincial needs analysis that takes your needs & wants into consideration and provide a solid financial plan to help you meet your goals and dreams.
Rene Gonzales
Senior Representative
c. 512-568-7203
e. [email protected]
www.Primerica.com/ReneGonzales
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