The Tax Cuts and Jobs Act resulted in major tax reform. Savvy tax planners can make the most of these changes and take steps to reduce their tax obligations. Three specific examples include adjusting how you donate to charitable donations, making sure you can get certain business deductions and using tactics that work for your specific income bracket.
Who should I adjust charitable donations?
The Tax Cuts and Jobs Act essentially doubled the standardized deduction. As such, it is more likely that taxpayers that used to use itemized deductions will now use the standardized deduction amount, now set at $12,000 for individuals and $24,000 for married couples filing a joint tax return.
This could impact charitable donations. As noted in a recent publication by a retirement professional with USA Today, some taxpayers could still take advantage of charitable donations by bunching the contributions into one large gift every other year. This would allow the taxpayer to itemize tax returns one year and use the standardized the deduction, taking advantage of both options.
What do I need to know about business expenses?
The new law also impacted business deductions. Business owners can take advantage of a 20 percent deduction for certain qualifying business income if they have a pass-through business entity. The process is complex and is best reviewed by a tax professional. The legal professionals with Goldburd McCone LLP can discuss this option in more detail.
How should I change my tax planning strategy for my specific bracket?
Taxpayers with a high tax rate could consider adjusting retirement savings to lower their tax obligations.