You may have already spent your 2017 tax refund, but that doesn’t mean you should forget about your taxes until next April. Because of recent tax-law tweaks, you may be able to trim your 2017 tax bill even more. Meanwhile, if your tax rate changed under the new tax law, you could increase your take-home pay–or avoid a nasty surprise when you file your taxes next spring–by adjusting your withholding.
File an amended return and get an extra refund. A bill signed into law in February extended more than 30 tax breaks that had expired at the end of 2016, which means early filers may have missed out on some money-saving opportunities. If you did, all is not lost: You can still amend your 2017 tax return to claim them and get a refund.
Many of those breaks applied to businesses, but Congress also brought back the deduction for mortgage insurance premiums and several tax breaks for energy-efficient home improvements (see the “tax credits” section at www.energystar.gov). It extended the deduction for tuition and fees for 2017, which can reduce your taxable income by up to $4,000 for college expenses if you weren’t eligible for the American Opportunity or Lifetime Learning Credit. And if your mortgage lender discharged any of your debt on your principal residence in 2017 (which often happens after a foreclosure), you may be able to exclude the amount from your income. The IRS has more detail online.
If you’re eligible for these breaks but didn’t claim them for 2017, file Form 1040X to amend your return and get a refund. If the breaks reduce your adjusted gross income, you may get an extra refund by amending your state return, too, says Mark Luscombe, principal analyst for Wolters Kluwer Tax and Accounting.
Adjust your withholding. The tax law passed in December reduced tax rates, nearly doubled the standard deduction, and capped or limited some itemized deductions. With the new tax math, the amount of money you have your employer withhold from your paycheck for taxes may no longer line up with how much you owe the IRS when you file your 2018 return. You could be paying more than you should now, or paying too little and end up with an unexpected tax bill.
Employers adjusted their withholding tables for the new tax laws in February and March, which boosted take-home pay for many employees. But if your spouse works, you have more than one job, or you have other taxable income, you may need to adjust your withholding on your own. Some people may owe more because of changes to deductions, says Michael Eisenberg, a CPA in Encino, Calif. Many of Eisenberg’s clients in high-tax California had been deducting more than the new $10,000 limit on state and local taxes. With those deductions capped, they may have a higher tax bill. Run your numbers through the new withholding calculator, then file a new W-4 form with your employer to adjust your withholding, if necessary.
Eisenberg also recommends taking a look at your tax situation now to predict whether you’re likely to claim the standard deduction or itemize for 2018. (H&R Block has a tax reform calculator at www.hrblock.com/tax-calculator.) If you are likely to take the standard deduction, you won’t be able to claim items such as charitable donations. You may want to bunch a few years’ worth of charitable gifts into one year or make a tax-free transfer from your IRA to charity if you’re older than 70 1/2.
This article provided by NewsEdge.