2018 taxes will look different than years past. The standard deduction doubles and personal exemptions are gone. If you think you may owe taxes, you still have a time to take advantage of opportunities to reduce that burden.
The IRS estimates that more than 20% of tax filers aren’t withholding enough money from their paychecks to cover their 2018 tax bill.
How to get a tax break for your business
If you report income from a job like driving for Lyft or selling goods at a market or online, you may be able to deduct your expenses as a small business. In the past, you could deduct qualifying expenses for a hobby if you weren’t really trying to make a profit. That deduction is no longer valid. However, if your job or small business is how you support yourself, you can still qualify for business deductions.
Contribute to retirement accounts
If you haven’t maxed out contributions to your retirement accounts, doing so now could help reduce your tax burden. If you are under 50, you can put $18,500 into a company-sponsored 401(k) plan. If you are over 50, that number goes up to $24,500.
Adding an IRA to the mix is a great idea if you don’t already have one in place. You can put $5,500 into the account for 2018. Add another $1,000 if you are over 50. So long as you make the deposits before April 15, 2019, they’ll help reduce your 2018 taxable income.
Remember the child and dependent care tax credit
This is a tax credit, which differs from a tax deduction in that it applies even if the amount exceeds your total tax bill for the year. Costs to care for a child under 13, incapacitated parent, spouse, or other dependent so you can work are eligible for the credit.
Earned Income Tax Credit
If your adjusted gross income was less than $55,000 in 2018 you could get a tax credit between $519 and $6,431. The IRS won’t chase you down to offer you the credit, though. One out of every five workers eligible for EITC missed out because they didn’t claim it on their taxes last year.
If you think you may be eligible, talk to your tax preparer. If you could have claimed EITC but didn’t during any of the past three years, let them know that you’d like to find out how to re-file those tax returns to get the money from past years, as well.
This year, filing taxes may produce new challenges. If you aren’t sure whether to take the standard deduction or itemize, have your tax preparer run the numbers both ways to see which option reduces your tax bill or increases your refund. We offer free quotes to help you make sure you’ve taken advantage of the best tax deduction strategy.