Happy New Year! It’s a brand new year and the majority of the new tax provisions that were signed into law in December 2017 take effect for the tax year 2018 (the taxes you are filing now).
This year, you may have experienced major life changes like having a baby, a new job, or moving to a new home. New years can often bring these new 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.
Keep records. I’ve said it before and I’ll say it again – keep records. Really, do it – it’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.
At the very least, place all important tax papers in a large envelope and store it in a safe, clean space. 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 you have children and your income is under $54,998 in 2018 and $53,930 in 2017, you may 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.
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 $5,500 ($6,500 when you’re 50 or older) to a traditional IRA in 2018, and possibly get a tax deduction on your 2018 taxes and lower your taxable income. 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 up until you file or the April 15th tax deadline and lower your taxable income.
Pro Tax Tip: Don’t forget to make sure you tell the plan administrator that your contribution is a 2018 contribution if you make a 2018 contribution.
Claim charitable donations. Don’t forget that when you clean out your closet and donate to a charity that your charitable donations could be worth a valuable tax deduction if you itemize. If your donation is $250 or more, the charitable organization should give you a receipt or acknowledgment proving your donation. You can still take the tax deduction on your 2018 taxes if you donated money on your credit card on December 31st.
If you didn’t donate last year, 2019 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.
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 Tax 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 with an average of 15 years experience to get your tax questions answered. A TurboTax Live CPA or Enrolled Agent can also review, sign, and file your tax return.