So, it’s been a few months since you wrapped up your 2018 taxes and you are in dire need of a much needed break from the financial pressures of tax season. However, you can’t quite let go of that nagging feeling that there will be some changes to be mindful of for next year. Preparing early is always a good strategy for success, and finding a good tax strategy for the coming year is among the best ways to be financially successful. So what do you need to keep in mind for the rest of 2019, and what can you do differently? Let’s break down what you should expect going forward!
New Brackets
Tax brackets are a major defining factor in what you will ultimately pay in taxes for the year. As we have a progressive tax system, higher earners will ultimately pay more on their higher income but will still be able to take advantage of rates from the brackets below them. You don’t pay the marginal tax rate from every dollar you earn, but pay in a graduated manner that allows you to take advantage of lower rates. Your tax strategies for 2019 will be based around these rates, and will be adjust depending on your marital status and whether or not you have children. Your new brackets are already publicly available, so give them a look and see where your rates change!
Capital Gains
Investment income has seen a little bit of a change after tax reform took place. The main difference, and useful information for your tax strategy, is what qualifies as short-term and long-term gains. If you have held on to an investment for a year or less and then proceed to sell, that is considered a short-term gain and one that results in being taxed at the traditional bracket. However, holding onto investments past the first year mark (if able to do so) can result in a lower rate, a great tax strategy for maximizing your dividend income.
Popular Tax Credits
Credits should be a major point of focus on your tax strategy, as credits lead to a greater reduction in your taxes than typical deductions. Depending on your filing status, you will have different credits available to you that will directly reduce your bill (as opposed to a deduction which will amount to less than what the deduction actually is). A prime example of this would be with families at a low to mid-level income. Both child tax credits and earned income tax credits can provide huge relief for families across America, and these gains can be felt as either a reduction of your tax bill or a return.
Tax credits for education are also a major help when developing your tax strategy for the rest of the year. Credits like The American Opportunity tax credit can pay up to 100% of eligible tuition and numerous fees. Expenses can also be taken into account thanks to the Lifetime Learning tax credit, which offers a 20% credit on up to $10,000 in eligible expenses (depending on income level).
Maximizing your Situation
While credits are amazing, deductions are more prominent for some of the regularities in life. Deductions can be made regarding things like your mortgage interest, donations to charities eligible for deduction, and even retirement planning! The best tax strategy to look where your money is being moved around to, and see what deductions and credits can be applied to these transactions. It’s simple, but taking a hard deep look at those expenses for the rest of the year will open your eyes to the possibilities of tax reduction.
Your bracket, your investments, and your various situations all present a great amount of options, and getting the most out of it requires an expert. Tax professionals like Michael Di Pietro C.P.A. are here to help get you the most out of your tax situation!
