On December 22, Donald Trump signed the Tax Cuts and Jobs Act into law, which could mean there are some pretty big changes coming your way in the new year. Additionally, it leaves a ton of people trying to figure out how to get their affairs in order before the clock strikes midnight on NYE. Luckily, there are some things you can do to benefit your 2017 taxes, so get on it, because this is the final chance to lower your tax bill or increase your refund when you file in 2018.
Certified public accountant (CPA) Julie Welch tells Romper that even though the year is very close to its end, there are some last-minute moves you should consider in the last few days of 2017. Especially with the changes going into effect, it's important now, more than ever, to pay attention this year. Whether you've read into the new law or not, many of the tax changes could affect you as a parent in 2018, and it's pretty frustrating.
So put on your glasses and grab a pen and paper (or whatever you do to get into note taking mode) because these are the tips that will save you money for years to come or at least get the most out of your taxes before the new tax law goes into effect next year.
According to Welch, many itemized deductions will no longer be a thing in 2018. So, consider paying as many itemized deductions as possible this year. This includes things like state and local taxes or charitable contributions. All you need to prove your charitable donations (this even includes groceries you buy and donate) is the receipt or written acknowledgement, according to The Balance.
Single and unmarried parents stand to lose the most under the newly-signed tax reform law, according to CNBC. But there's something you need to know that may help with that a little. With a divorce, alimony is no longer deductible for those divorced after December 31 of 2018, according to CNN. Divorce lawyers "use this tax deduction as a way to make a settlement go down easier – because there was more money in the pot to be able to split up," said New York-based divorce attorney Lisa Zeiderman to CNN. Consider finalizing your divorce this year or before the end of next year if you don't want to be affected by this change.
With just one extra mortgage payment a year, you will take your pay-back period down quite a bit. For example, according to Interest.com, an extra mortgage payment each year will take a 30-year home loan down to 26 years and potentially save you tens of thousands in interest. Additionally, Welch says that the interest on home equity loans aren't going to be deductible after the new year. So if you can pay off a larger chunk on your mortgage, before 2018 is definitely the time to do it.
To go hand in hand with the idea of paying off as much of your mortgage as possible, it's a good idea to weigh the pros and cons of refinancing if you have a line of credit out on your home. (Because, again, interest won't be deductible anymore.) Refinancing can have an effect on your credit, according to Credit Karma, so researching your options and calculating what saves you the most is best in this situation.
One thing that could potentially help you out with the tax law updates is that the gift exemption will increase to $11,200,000 per couple, according to Welch. So if you're planning to gift or receive something high-dollar that falls under the gift tax (like an estate), wait until 2018. However, if you want to gift smaller increments, you can gift up to $14,000 to any one person tax free before NYE and up to another $14,000 tax free after, according to H&R Block.
Welch also says that it's a good idea to pay off any deductible employee business expenses before December 31. Because miscellaneous itemized deductions are pretty much nixed in 2018, you'll want to get those office products or wifi bills (if you work from home) paid off and accounted for by NYE.
According to H&R Block, you must have enough medical expenses accrued in 2017 to be able to use the money you set aside in your Flexible Spending Account (FSA). If you still have money left over, see if there are medically-related ways you can spend it over the next few days, before 2018 hits. Some good go-tos include new glasses or contacts, medicines you'll need next year, or end-of-year check ups. Then you can submit your receipts for eligible expenses within the set time for your plan. Check your plan, though, because some give you leeway past the new year as well.
If your unreimbursed medical expenses are able to meet 10% of your adjusted gross income (AGI) threshold and will otherwise itemize deductions, Welch says it's a good idea to pay off medical bills or expenses, like glasses, contacts or an elective surgery, before the end of the year. This is, again, because of the lack of itemized deductions coming in 2018.
In order to get in on the higher deduction rates, it's a good idea to put some money toward a retirement plan (like 401(k), 403(b), Deductible IRA, SIMPLE IRA, or SEP), according to H&R Block, or make IRA contributions before December 31, according to Welch. Both help lower your taxable income.
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