Now that the tax deadline for 2017 has come and gone it’s time to start thinking about next year, and there’s a lot to think about. 2018 will be the year that the new tax cuts will take effect. This will include some changes ranging from your tax withholding at work to a higher standard deduction and a loss of certain itemized deductions. So, it’s time to start reviewing your personal positions and make sure you can take advantage of the changes.
For most average people who have a regular job the most important area to look at will be the W-4. This key document indicates to your employer how much federal income tax to withhold from your paycheck based on the number of dependents you have. It also indicates whether you itemize deductions and whether you have multiple sources of income.
For 2018, coming up with the right number for withholding has different values that will change the answer. With the new tax cuts, personal and dependent exemptions are out. It is also expected that fewer people will itemize deductions on their 2018 tax returns because of the doubling of the standard deduction.
For some people who still need to itemize, the increase of the standard deduction will mean that they must increase things like charitable donations so that they can meet the new threshold.
In 2017 you could borrow against your home and deduct the interest paid on loans up to $100,000 regardless of what the money was used for. For 2018 this will no longer be the case. Now if you borrow against your home you won’t get a break unless you use the money towards purchasing or improving the home that secured the loan.
2018 will also be a good year to increase your contributions to your 401K. There are many more ways of taking advantage of the new tax laws. Talk to a professional now and see where you stand.