Five Tax Tips

The Tax Cut and Jobs Act, enacted in 2017, made major changes to the tax code that could have a significant impact on your bottom line. However, many taxpayers won’t fully understand how the new rules will ultimately affect them until they file their 2018 taxes — and by then, it may be too late to effect much of a change. But that doesn’t mean you can’t get a jump start on planning for next year. Here are some tax moves that you can start thinking about right now to put yourself in a better position for 2019.

Adjust Your Withholding. Many filers are finding their refunds are less than they’ve come to expect in recent years. This is because 2018 ushered in changes in tax rates, the standard deduction and personal exemptions. Marginal tax rates, for example, have been lowered. For instance, the 15% tax bracket has been reduced to 12%, and the 25% bracket has been lowered to 22%. For 2019, the standard deduction is raised to $12,200 for single filers and $24,400 for married couples filing jointly. Plus, in 2018, the personal exemption was eliminated altogether. All of these changes mean you might need to adjust your withholding to get the refund you were used to getting under the previous tax code.

Increase Contributions to Your 401(k). For 2019, you can increase your maximum contribution to your 401(k) and other employer sponsored retirement plans by $500. That increases the maximum contribution from to $19,000 in 2019, while catch-up contributions for taxpayers 50 and older remains at $6,000.

Establish an HSA if You’re Eligible. With the increased standard deduction, it may be harder to write off medical expenses. But this is where an HSA can really help if you’re enrolled in a high-deductible insurance plan. With an HSA, you can make a tax-deductible contribution up to $3,500 for a single person, or up to $7,000 for a family, for 2019 (and a catch-up contribution of $1,000 if you’re 55 or older). And with an HSA, your tax-deductible contribution is not contingent on being able to itemize your deductions.

Prepare for Higher Taxes if You’re Shopping for a Luxury Home. Beginning in 2018, mortgage interest on total principal up to $750,000 in qualified residential loans can be deducted. This is reduced from the previous principal limit of $1,000,000 (the new limit for married couples filing separately is $375,000). So if you’re in the market for a higher-end home in 2019, you should figure these higher tax costs into your budget.

Take Advantage of New 529 Plan Opportunities. If you have kids in private school, the tax code changes offer particularly good news. Beginning in 2018, 529 savings plans have been expanded to allow the use of up to $10,000 in funds to pay for grade K-12 tuition in addition to college. And the $10,000 limit is per account, so if you have two plans for your child, that limit would be $20,000.

If filing your 2018 taxes has yielded an unwelcome surprise, start your 2019 tax planning as early as you can in the tax year. The sooner you start, the better position you’ll put yourself in to minimize potential liabilities next year.

Source: https://www.forbes.com/sites/jrose/2019/01/09/13-best-tax-moves-to-start...