Your 2018 tax return will be quite different than your returns from 2017 or 2016. At Pasquesi Sheppard, we know folks around Chicago don’t love tax season, but now is the time to start planning for 2018. It’s especially critical to get an early start this year because the Tax Cuts and Jobs Act (TCJA) has substantially changed the tax environment. Learn a few tax tips for 2018 below.
The last day to return your tax file to the IRS is April 17, 2018. If you file for an extension, you’ll still have to file your taxes, though. Generally, extensions are six months long, meaning that your taxes are due in October 2018.
The IRS reminds taxpayers of big changes that apply to most individual 2018 tax returns. Initial inflation adjustments, which were released by the IRS last year, were later revised to reflect inflation as well as the changes brought by the Tax Cuts and Jobs Act (TCJA).
The TCJA has dramatically changed the tax code. Among the adjustments that affect most taxpayers are:
Before the TCJA gets passed, individuals who pay alimony or maintenance can deduct an amount equal to the payments made during the year as an “above-the-line” deduction. And before the TCJA is passed, alimony and maintenance payments are taxable to recipients.
But under the TCJA, there will be no deduction for alimony for the payers, and alimony will not be gross income to the recipients.
These rules kick in after Dec. 31, 2018, and they do not apply to existing divorces and separations. Still curious about what’s new for the tax code in 2018? The IRS lists a few details of other key figures that have changed.
At Pasquesi Sheppard, we take pride in helping taxpayers from Lake Bluff to Chicago. Attached find our easy-to-read federal tax bracket for single filers. Of course, our chart just shows income thresholds.
FEDERAL TAX BRACKETS FOR SINGLE FILERS
|Tax Rate||Taxable Income Bracket|
|37%||$500,001 or more|
A tremendous number of variables affect your overall tax liability for the year. Looking at these variables early in the year can give you more opportunities to reduce your 2018 tax bill. For example, the timing of income and deductible expenses affect both the rate you pay and when you pay.
By regularly reviewing your year-to-date income, expenses and potential tax, you may be able to time income and expenses in a way that reduces, or at least defers, your tax liability. In other words, tax planning shouldn’t be just a year-end activity.
Last year, planning early was a challenge because it was uncertain whether tax reform legislation would be signed into law, when it would go into effect and what it would include. This year, the TCJA tax reform legislation is in place, with most of the provisions affecting individuals in effect for 2018–2025. And additional major tax law changes aren’t expected in 2018. So there’s no need to hold off on tax planning.
But while there’s more certainty about the tax law that will be in effect this year and next, there’s still much uncertainty on exactly what the impact of the TCJA changes will be on each taxpayer. The new law generally reduces individual tax rates, and it expands some tax breaks. However, it reduces or eliminates many other breaks.
The total impact of these changes is what will ultimately determine which tax strategies will make sense for you this year, such as the best way to time income and expenses. You may need to deviate from strategies that worked for you in previous years and implement some new strategies.
To get started on your 2018 tax planning, contact us. We can help you determine how the TCJA affects you and what strategies you should implement now and throughout the year to minimize your tax liability.