We have a new tax law to adapt. No matter how it will affect you. You need to be ready by taking some steps of adaptation to the new law.
a) Tax projection should be the first step
Start with looking for a useful tax calculator like CalcXML or CNN. If it is too complicated for your situation, ask your accountant to build for you a tax projection for 2018 where you would be able to foresee how it may affect you, will be paying more or fewer taxes and what can be your tax return for this year.
b) Tax withholding adjusting
Withholding the right amount will be the better way to deal with the tax changes Notice 1036 IRS. Payroll changes can be calculated by using the new withholding tables. Withholding more is better, overpaying tax to IRS and get a refund is much better than underpaying and pay fines and penalties. To be closer in your estimation of the new tax realty use IRS Withholding calculator. Make the necessary changes in your payroll managing (Form W-4)
c) Losing employer-subsidized commuter benefits
The new tax law eliminates the tax incentive for the participation of employers in the commute costs of their employees. In the case that you are taking advantage of this benefit, you better increase your contribution related to your Commuter account.These contributions will be count as Pre-Tax. The maximum amount per month is $255.00
d) What would be the effect of selling or buying a home?.
Mortgages interests deduction sere dropped to the limit of a debt of $750,000 on a primary home. I the case of a more significant mortgage with plans to stay at the same residence it will remain the same for 1 million if purchased before 12-15-18.
In case of buying a new home, a big mortgage will not be that attractive. A vacation house or second home too will be less attractive. Also, the reason for that is that the interest on the mortgage will not be deductible above the top of $750,000, this includes the primary home.
When selling a primary home a $500,000 gains by a joint filer and a $250,000 by a single filer can be excluded of capital gains if living in a primary residence for two of the last five years. Expenses made when moving to the new working place are no longer deductible.
Refund Timing for Earned Income Tax Credit and Additional Child Tax Credit Filers IRS
e) Roth 401 (k) and Pre-tax decision. Roth 401 (k) Pre-tax
Tax rates by nature are gradual by brackets. Making lower income means paying lesser tax. Making higher profit means paying minor tax. When using saving for retirement is not that necessarily it is better option put money to one of this possibility, Roth 401(k) and a Roth IRA.
The change of deduction cap fixed on $10,000 state and local taxes (SALT) can make the taxpayer lose deduction by items. A good step would be putting the numbers on paper to compare the pre-tax 401(k) contribution and see if it can save you some tax paying. In case that it doesn’t itemize and your regular deduction is passing your past years, it could be better to change from Pre-Tax to Roth, it can be done easier using this calculator, make sure the new law updates it.
f) Home equity loans and its interest deductions.
Equity loans interests deduction has been suspended through 2025 except if it is directly used for a significant improvement of the primary home. Home equity loans could safer a rise in interests rates. A careful pass should be paying back existing loans.
g) 401(k) loan and leaving the job
The outstanding balance of a 401(k) loan gained a more easy treat, in deference from the prior law, credit outstanding under the new can be paid at the next April and save the 10% penalty and the tax paid on balance as taxable income.
As an example, leaving a job on May having an outstanding balance of $3,500 can be cured by paid to an IRA at the coming April and yet be deductible with no penalty of 10%. Called a rollover.
Consider a consulting with a professional expert in taxation; it will be a good step.
New Tax Law changes shown by IRS Releases of 2018 Withholding Tables.
Changes are coming! The Internal Revenue Service (IRS) updated the 2018 income-tax withholding tables according to the new tax law. By using the updated tables during the fiscal year 2018, employers will be able to reflect the changes in the rates made by the new law.
February 15, 2018, is instructed to be the deadline for the employers or payroll service givers to start using the new law withholding tables, though it is recommended to begin as soon as possible.
2018 Tax Refund Chart Can Help You Guess When You’ll Receive Your Money
Before February ends, your checks and pay-stubs will start to look distinct than it was, paychecks will be showing the variation in total net income. This change may have some differences in timing depending on your employer or your payroll service.
Payroll service providers and employers use the withholding tables to calculate the tax to withhold from your paycheck, according to your salary, marital status, and type of allowances you have. The new law tables increase the standard deduction as personal exemptions repeal and new tax rates and brackets.
Early Release Copies of the 2018 Percentage Method Tables for Income Tax Withholding are here: (https://www.irs.gov/pub/irs-pdf/n1036.pdf)
There is nothing to do with the forms W-4, they are going to stay with the new withholding tables for the employees that are on file with their employers. For the moment you have nothing to do with it – but keep reading Pay-stub Maker blog.
In 2018, Some Tax Benefits Increase Slightly Due to Inflation Adjustments, Others Unchanged
IRS advice is that the new tables are expected to give the correct amount of tax withholding.
After the IRS finishes revising the Form W-4, You may need to make some change in it. A withholding tax calculator is expected to be ready by the end of February.
There one more subjects to take in consideration, FICA withholding (Medicare and Social Security) taxes. According to the new law, FICA withholding will range as the following: Social Security is 6.2% with a taxable base of $128,400 while the employee portion Medicare tax is 1.45% with no limit. There is additional Medicare surtax (0.9%) on wages exceeds $200,000.00,or $250,000.00 for married taxpayers.
Using on-line Paystub Maker will save you all the headache and hassle of recalculating all payroll withholdings.
PAYSTUB MAKER team will be back with more valuable information.