It’s year-end tax planning time. And when it comes to paying taxes, I am like most folks – not smiling when writing that check. However, it is a lot easier to pay taxes when you have some perspective.
Approximately 8% of the world’s population lives in a developed country with clean drinking water, reliable electricity, good school systems, and is generally safe. In my travels, I have been to a handful of developing countries where many of these things cannot be taken for granted. Visiting these parts of the world has given me a different perspective – one of gratitude for being one of the 8% and having US citizenship.
When you keep that in mind, it feels like a privilege to pay taxes for what we get in return.
However, I also believe in good tax planning, so you don’t pay more than necessary. As you are planning for taxes this year, it is good to keep in mind the changes enacted under the Tax Cuts and Jobs Act.
In 2018, most folks will take the standard deduction versus itemize deductions. The standard deduction is a dollar amount that reduces the amount of income on which you are taxed and varies according to your filing status. There is an additional standard deduction for individuals who are blind or age 65 or over. You cannot take the standard deduction if you itemize deductions. (IRC section 63, as amended by TCJA section 11021).
|Married Filing Jointly, QW||$12,700||$24,000|
|Married Filing Single||$6,350||$12,000|
|Head of Household||$9,350||$18,000|
|Extra if ≥ 65 or blind each – S, HOH||$1,250||$1,600|
|Extra if ≥ 65 or blind each – MFJ, MFS, QW||$1,250||$1,300|
In 2017, you were subject to a tax, or penalty, for failing to maintain a health insurance plan that provided at least minimal coverage. The penalty still applies in 2018, but is repealed permanently as of 1/1/2019. (IRC section 5000A, as amended by TCJA section 11081).
In 2017, withdrawals from a 529 plan are tax-free if used for qualified higher-education expenses such as tuition, fees, books, supplies and equipment required for attendance at an eligible college, university, or vocational school in the United States. In 2018, you can now withdraw up to $10,000 per year, per student, tax free from a 529 plan for tuition at an elementary school or secondary public, private, or religious school permanently as of 1/1/2018. (IRC section 529, as amended by TCJA section 11032).
If you would like more information, here is an easy to follow tax guide: http://deductornot.com/wp-content/uploads/2018/01/New-Federal-Tax-Law-Changes-2018.pdf
And remember, you have to pay your taxes. How you feel about paying them is your choice.
If you would like to figure out how tax planning can fit into your wealth plan, I am happy to help. To schedule a time to talk give me a call at (619) 490-4059.