Yet again, it’s time to file taxes. Well, the world’s constantly moving, and there have been a few changes to the tax code. For employees and employers alike, we’re all looking for ways to keep more of our hard earned income. The reforms to the tax code enacted last year required employers to withhold a smaller amount of workers’ pay than previous years, resulting in an increase in employee take-home pay.
Whether you are an employer or employee, taking advantage of some less well-known changes to the tax code can result in some positive results. Here are three crucial deductibles that have the potential to improve your tax return according to an August 2018 article at AccountingToday.com:
- Maximize qualified business earnings – Individuals who own interests in a sole proprietorship, partnership, or LLC may be able to deduct up to 20 percent of their qualified business income. Clients can adjust their business’ W-2 wages to maximize this deduction. It was stated in the tax legislation that the 20% qualified business deduction will not be considered an “itemized deduction.” If it’s not an itemized deduction, then small business owners can claim the 20% qualified business income deduction, and still itemize their deductions or claim the standard deduction, utilizing the amount that provides greater benefit. Also, the standard deduction has increased significantly and may compensate for deductions and exemptions eliminated in the new tax bill.
- Tax deductions for charitable donations – Recently cash contributions for public charities increased from 50 to 60 percent of adjusted gross income. The charitable donation deduction allows you to lower your taxable income for donations or gifts to qualified, tax-exempt organizations which you file on Schedule A on Form 1040. You can also claim a charitable tax deduction in the funding year and schedule grants over the next two years or other multiyear periods when clients set up donor-advised funds.
- Greater education focused benefits offer greater options – Under theTax Cuts and Jobs Act, earnings in a 529 college savings plan may now be used to pay for tuition not just for higher education but also for elementary or secondary public education or for private/religious schools, up to $10,000 per year. New York State has not adopted this Federal Law change. If your kids have graduated and entered the job force, they may be able to deduct student loan interest from their adjusted gross income. If you took loans to study later in life and have student loans, you may be able to do the same!
Among the additional deductions you may be able to take are;
- Contributions to health savings accounts
- Contributions to retirement plans
- 50% of self-employment taxes
- Health insurance premiums paid, especially beneficial if you are self-employed.
Are you still wondering if you are maximizing your refund? Get expert advice from Shapiro Financial Planning Group, we can show you the best path forward.
