November 2018 Boerne Business Monthly Article written by Nancy Meza, CPA, Tax Manager at Akin, Doherty, Klein & Feuge, P.C.
“Another tax filing season is behind us, but it’s never too early to start thinking about next year. ADKF has a Personal Service Division, or PSD, to help with just that! Our PSD group specializes in individual tax returns, and small to medium sized family owned business returns. Our entire tax staff, and in particular our PSD tax professionals, are here to assist with both tax planning and return preparation.
A lot has changed for this upcoming tax filing season, covering the calendar year 2018, since Congress passed the Tax Act changes in December 2017. Here are just a few topics and suggestions to be thinking about as we approach the end of 2018:
Do you have an up-to-date will? Have you updated beneficiaries on your life insurance policies and IRA’s? Have you looked at your business to see if you qualify for the new Section 199A deduction, applicable to pass-through entities such as subchapter S corporations, for the tax year 2018? Do you have a capital loss carryover on your personal 1040?
…Most individuals want to be “penalty proof’ when it comes to how much you pay in for estimated tax deposits during the year. Being penalty proof generally means you need to pay in the smaller of either: 1) your prior year tax (and for some, it needs to be 110% of the prior year tax) or 2) 90% of the current year tax. With so much changing each year most clients rely on paying in 100% or 110% of the prior year tax. But along with the new tax law changes the federal withholding tables also changed. The IRS is urging individuals to look at their year to date withholding on their most current pay stub and make sure that you are on track to have the correct amount of federal withholding by the end of the year. It’s not too late to adjust your withholding at work.
The new standard deduction for many will be a welcome change. For married filing jointly the new standard deduction for 2018 is $24,000. For single or married filing separately the deduction is $12,000, and for the head of household, the amount is $18,000. However, the old “personal exemption” has gone away. For a majority of taxpayers, the new exemption rates will be a net plus with respect to tax savings.
If you itemize on Schedule A, instead of taking the standard deduction, many things have changed for you too. For those of us in Texas, we generally deduct our real estate taxes and an amount for state and local sales tax. Under the new rules, the total deduction for real estate taxes plus state and local taxes cannot exceed $10,000. Many of our clients now exceed that amount of real estate taxes each year. Another big change for those that itemize is the miscellaneous 2% deductions are no longer deductible. This includes investment advisory fees, tax preparation fees (unless they are deducted for your business), and unreimbursed employee business expenses. These former deductions have been eliminated. And for those of you who receive a W-2 from your employer, you will no longer be able to deduct your out of pocket expenses on Schedule A. New mortgage acquisition debt is now limited to $750,000 (this was previously $1,000,000). So, before you go buy your million-dollar dream house, or refinance your current home loan, remember that only a portion of your mortgage interest will be deductible. This is not as straightforward as it sounds, please call your tax professional for a full explanation based on your particular situation.
Another positive change for many individuals is the child tax credit has been increased to $2,000 per child, and the phase-out has been raised, making many more families eligible. The child still must be under 17 at the end of the year, that has not changed. The credit begins to be phased out for returns with adjusted gross income over $400,000 for married filing joint returns, and $200,000 for all other filers.
A lot has changed for the tax year 2018. Don’t be caught off guard and surprised. Speak with your tax advisor and call our office for an appointment.”
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Nancy Meza, CPA, is a Tax Manager at Akin, Doherty, Klein & Feuge, P.C. (ADKF). ADKF is a full-service accounting firm with offices in San Antonio, Boerne, and New Braunfels. Nancy graduated from the University of Texas at San Antonio in 1993 and has been with the firm since January 2015. She is married with three kids.