NEWS LETTER December 11, 2018 by AUSTIN TAX SERVICES INC, 910 Portland Ave, Gladstone, OR 97027 Office Phone 503-657-0039; Fax 503-650-8888; Website www.AustinTaxServicesInc.com
This is the year taxpayers will learn first-hand how the new tax provisions passed by Congress last December will impact their tax returns. Many will see their taxes go down, but higher-paid wage earners, 2-income families, and many who itemized their deductions may actually find that they have smaller refunds or even owe tax when they file due to the lower tax withholdings from their paychecks per the revised withholding tables that went into effect early in the year. If you think this might be you, you can ask your employer to withhold extra tax from a paycheck or two before the year ends or you can send in a 4th quarter estimated payment by January 15th , 2019 to cover any anticipated shortfall.
Some new rules for 2018 returns: Taxpayers with a home equity loan or line of credit – if funds were NOT used for buying, building or improving the home that secures the loan, the interest is no longer deductible – even on loans originating in prior years; but if you can provide documentation for amounts spent on home improvements, at least a portion of such interest can be claimed. The deduction for combined state income or sales tax plus property tax is subject to the new $10,000 limitation. Employees are no longer able to deduct unreimbursed work expenses. Taxpayers have lost both the personal exemption and dependent exemption, although there is a new $500 credit for supporting a qualifying older dependent. And taxpayers whose divorces are finalized AFTER Dec. 31st, 2018 and pay alimony will no longer be able to deduct it, though such recipients will not need to report it as income on their tax returns.
Please keep in mind that, even with the increased federal standard deduction, many of you will still need to keep track of your itemized deduction expenses for high-tax states like Oregon so as not to pay more tax than you should. This especially applies to medical expenses with the improved 7.5% AGI threshold; plus taxpayers who are age 65 and up may also be able to claim the Oregon medical subtraction. Due to the sweeping changes in federal law, Oregon is developing its own version of a Schedule A which will also affect a number of Oregon’s additions, subtractions and credits that were formerly adjustments to federal amounts.
IRS is busily revising hundreds of tax forms for the upcoming filing season. The 1040 will have a completely new look – the size of a postcard, but there will be up to six new schedules to attach that show certain supporting calculations and details as applicable. Short forms 1040-EZ and 1040A have been eliminated.
Beyond the special issues for 2018, there are still the usual year-end planning strategies to consider: Maximize contributions to 401(k) plans and 529 education plans. IRA Contribution Limits for 2018 remain at $5500 ($6500 for those age 50 or over as of 12/31/18). Take required minimum distributions from your employer-sponsored retirement account or Traditional IRA if you are age 70½ or older in 2018. Review your investment portfolio for losses that might be taken to offset gain from sale of stocks that increased in value. And if you have exercised employee incentive stock options during 2018, consider selling the stock before year-end if its value has declined significantly since the exercise date to avoid being hit with a large Alternative Minimum Tax.
Standard Mileage Rates for 2018: Business, Farms & Rentals 54.5 cents/mi; Medical 18.0 cents/mi; Charitable 14.0 cents/mi. Moving expenses are no longer deductible. Keep track of your mileage throughout the year and record odometer readings at the start and end of year so business use percentages can be calculated.
We here at Austin Tax Services are committed to working hard in the best interests of all our clients. We encourage you to get in touch with us during the year as questions come up and life circumstances change so we can help you plan for the best tax outcome. Thanks always for the great referrals and the continuing opportunity to serve you!
OUR BEST WISHES FOR A SAFE AND PROSPEROUS YEAR 2019!