By now, we're in full swing under new tax laws. The Tax Cuts and Jobs Act (TCJA) was signed into law at the end of 2017, with taxpayers seeing the real affects when they filed their returns in early 2019. This legislation has made a profound impact on many taxpayers and has created new planning opportunities.
Here are a few items to note:
Deductions - Due to the increase in the standard deduction, many individuals did not itemize their deductions last year. While this may seem like a simplification for some, there are still strategies to consider. For example, we can help you navigate whether it makes sense to "bunch" deductions, such as charitable contributions.
Withholdings - You may have experienced a surprise when you filed your tax return. This was likely because your withholding adjustment may not have reflected your actual tax situation. Now is a great time to look at your projected tax. Doing this will help avoid unwanted penalties/interest as well as help you plan for cashflow needs. There is time to adjust your withholding before the end of the year.
Qualified business income deduction - If you own a business or rental property, you likely discussed this deduction (a potential 20% deduction on business income) with us last year. There are several reasons why year-end planning is particularly important for this deduction. The deduction can be limited based on taxable income, which means that planning for minimizing income can be important. Also, for rental property owners, there are requirements that may need to be satisfied before the end of the year for you to take this deduction. We can help you navigate this complexity.
Divorce settlements - If you had a divorce or separation that recently was finalized, any alimony paid or received will not be deducted or included in income. Contact us if you have questions about how this will affect your tax liability.
Kiddie tax - Based on changes in the tax law, the tax on children's investment income (known as "kiddie tax") is now calculated at the trust and estate tax rates. There can be alternatives to filing a separate tax return based on the amount and type of income, and we can help you determine the best strategy.
There are many other opportunities to talk about as year-end approaches. And, many times, there may be strategies such as deferral of income, prepayment of expenses, etc., that can help you save taxes. We are here to help.
Whether it's working toward retirement or getting answers to your tax and financial questions, we're here for you. Please contact our office today at 813-943-4990 to set up your year-end review. As always, planning ahead can help you minimize your tax bill and position you for greater success.