While it may be true that the actual filing deadline for state and federal tax isn’t until April. Completing it sooner rather than later, particularly if you’re expecting a big refund is a smart move especially when accounting the new tax reform that just passed.
“For single filers with straight forward tax situations, one big factor to consider is whether you will benefit from itemizing this go-around. Starting next filing season, the standard deduction will get significantly more generous, moving from $6,350 to $12,000.”
For personal tax filers:
- The standard deduction has been increased for:
- Singles and married filing separately from $6,350 to $12,000;
- Heads of households Increased from $9,300 to $18,000, and;
- Married filing jointly and surviving spouses from $12,600 to $24,000.
- The child tax credit was increased from $1,000 to $2,000 (refundable up to $1,400), and will phase out after income reaches $400,000 for those who are married filing jointly, or $200,000 for all other taxpayers.
- Home mortgage interest deductions remain unchanged for existing households;
- For homes purchased in 2018, mortgage interest will now be limited to $750,000 in debt rather than the previous $1 million.
- Home equity mortgages and lines of credit are no longer deductible.
- State and local taxes are now deductible up to $10,000
- The minimum for medical expenses to be deductible was reduced to 7.5% of (AGI) adjustable gross income from the historical rate of 10%.
- Moving expenses, unreimbursed employee expenses and certain casualty and theft losses are no longer deductible.
- The Estate tax exemption increased from $5.45 million to $11.2 million for individuals and $22.4 million for married couples.
- Alternative Minimum Tax (AMT) increased exemption amounts and phase-out thresholds.
- Individual tax rates are now set at 10%, 12%, 22%, 24%, 32%, and 37%.
Other perks that aren’t going anywhere but may actually apply to you?
One of the most popular is the student loan interest deduction, which will allow you to deduct up to $2,500 in student loan interest that you paid off in the last year. If you can take the deduction, your lender will send you a form known as the 1098-E which will tell you how much interest you paid. If you didn’t receive a form, you can also check to see how much interest you paid by going over your account statements.
If you spent 7.5% of your income on medical expenses, from doctors fees and insurance premiums to smoking cessation programs to guide animals — even related transportation costs — you can claim the medical expense deduction. If you have a home office space in your house or apartment that you use regularly and exclusively for business, you can likely deduct a portion of the expenses associated with it, including utilities, repairs, rent, and insurance.
Finally, you might already know that if you donated any money to a qualified charity, you can claim the charitable deduction. You can also get it if you donated property: That includes giving unwanted clothes to the Salvation Army or Goodwill. Expenses incurred while volunteering for a recognized charity, like travel or lodging costs, are deductible as well.
Check for mistakes that trigger penalties:
You’re supposed to pay taxes on all of the money you made last year, not just the income from your primary employer. Reporting extra income often means reporting the income from a second job, or perhaps rental income, or even gambling winnings.
If you are a self-employed freelancer, you’ll have to submit a separate form, known as the 1099. Even if you sold any investments in the last year, like a cryptocurrency like bitcoin, you’ll also have to calculate and pay a capital gains tax.
While this tip might seem counter-intuitive — since it means you’ll pay more tax than you might have realized — it’s far better than being caught under-reporting your income: The IRS will charge you an additional penalty of roughly 20% of your underpayment as punishment.