It’s a brand new year and new tax laws were signed into law over the holidays, but one thing to keep in mind is that for the vast majority of taxpayers, the new tax laws do not affect their 2017 taxes (the ones they file in the first months of 2018).
Although not much has changed in tax laws for 2017 taxes, what may have changed for you are life changes like having a baby, a new job, or moving. Along with a new year often comes life changes which can reveal new tax implications, but life changes don’t have to make tax time daunting. TurboTax has you covered when it comes to the new year and new tax implications for you.
Right now, let’s look at what you can do to save on your taxes when you file this new year and the following tax year.
I’ve said it before and I’ll say it again — keep records. Really, do it, that’s the first step to saving on your taxes because you can’t take a tax deduction for an expense you don’t remember and can’t prove. This is especially important for those who are self-employed or an employee.
At the very least, get a large envelope into which you can place all important tax papers and put it where you can find it. When it is time to prepare your taxes, you’ll have all the documentation you need at your fingertips.
Claim the earned income tax credit.
If your income is under $54,998 in 2018 and $53,930 in 2017 and you have children, you likely qualify for the earned income tax credit. Some people without children can also qualify if they have lower income. According to the IRS, about 20% of people eligible to claim the credit fail to do so. If you are eligible, don’t miss out on this valuable tax credit.
Contribute to retirement plans.
The longer you wait to contribute to retirement plans, the harder it is going to be to realize your dreams in your later years. If your employer matches your contributions, that’s even better. But if not, you should still contribute to receive the tax benefit.
A $100 contribution to your retirement plan will cost you just $70-$75 in net pay, so the tax deferral is like getting free money, and if your employer doesn’t offer a retirement plan, you still can contribute to an IRA or a Roth IRA. You can contribute up to $18,500 ($24,500 50 or older) to an employer retirement account and $5,500 ($6,500 50 or older) to an IRA in 2018, and more if you are 50 or older. If you are self-employed you can contribute up to 25% of your compensation or $55,000 in 2018 (whichever is lower) to your SEP IRA.
Pro Tax Tip: Don’t forget you can still make a 2017 contribution to your IRA up to $5,500 ($6,500 50 or over) until you file your 2017 taxes or the tax year 2017 tax deadline and take advantage of a tax deduction for your contribution.
Claim charitable donations.
Don’t forget that when you clean out your closet and donate to charity that your charitable donations could be worth a valuable tax deduction if you itemize. If your donation is $250 or over the charitable organization should give you a receipt or acknowledgment proving your donation. Even if you donated money on your credit card on December 31st you can still take the deduction on your 2017 taxes.
If you didn’t donate last year, 2018 is a great year for you to clean out closets and give things you don’t want or need to a charity, so others can use them and you may be able to get a tax deduction while helping others. TurboTax ItsDeductible will help you value and track your charitable contributions year round and then transfer your contributions to your tax return.
Cash in on your education.
If you or a family member started college last year or will be starting college this year, you may be eligible for a tax credit for your education, through the American Opportunity Credit or the Lifetime Learning Credit. You should receive a Form 1098-T for expenses paid for college so make sure you take advantage of these valuable tax credits at tax-time.
Don’t worry about knowing these tax laws. TurboTax has you covered and will ask you simple questions about you and give you the tax deductions and credits you are eligible for based on your answers. If you have questions while you are doing your taxes, you can connect live via one-way video to a TurboTax Live CPA or Enrolled Agent to get your tax questions answered and your return reviewed so you can sign and file with confidence.