Unfortunately, the new tax law will not affect the taxes you file this year, aka your 2017 taxes. The new law will go into effect for this year’s taxes in 2018. You may see an immediate uptake in your next paycheck, as your employer may adjust for lower rates. The new lower rates only apply to certain tax brackets, even though most make the cut. With the next tax year looking bright, we highly recommend these 4 must read hacks for Houston taxes.
1. Self-Employed and Independent Contractors Get 20% Tax Free
Good news has arrived for those of you who fill out Form 1099 and other items associated with being self-employed. Up to the first one-fifth of your income may be tax free! Income qualifies for the break when it is any ordinary income earned from an S corporation, sole-proprietorship, or partnership. However, this income does not include anything you earn as an employee of the business.
2. Try the Standard Deduction
Those of you who itemize do so because you have many work related expenses for items such as a home office, mobile devices, travel, mileage, supplies, etc. Many of these individuals, families, and businesses go for the itemized deduction in order to claim the most. Next year, the standard deduction has doubled in value, making itemizing a less viable option.
The new standard deduction for 2018 is $12,000 for individuals and $24,000 for married couples filing jointly. It brings benefits in both forms of lower taxes and ease of filing.
3. No Personal Exemptions
With good news comes the bad. Personal exemptions accounted for up to a $4,000 deduction. They will not be allowed in the coming tax year. We believe it is a fair trade in exchange for the new higher standard deductions. Dependent exemptions remain allowable. These exemptions are usually given for how many children a tax payer has. It will grow from $4,050 per dependent in 2017 to $4,150 in 2018.
4. File Early and Electronically
Filing early is a good tip for any tax year. It eliminates the headache right away, as well as reduces the chance that a scammer will file a return on your behalf in order to cash your refund. Another benefit of filing early is your tax preparer is likely less busy. Trying to get a phone call returned in late March or early April can be impossible. The same goes for making an appointment.
More on Must Read Hacks for Houston Taxes
If you live in the Houston area and need a person to do your taxes, feel free to contact us for to learn more on how we can help.