President Donald Trump made due on his promise. Congress got a proposed tax law onto his desk before the end of the year. He signed it. Now taxpayers are trying to get a better idea of how the law will impact their tax returns.
A recent piece in Forbes notes that whether or not individual tax payers see a benefit or detriment to their taxes is a function of individual factors. These factors can include the deductions taken and the withholdings chosen.
How can I better ensure a tax benefit, not a detriment, with this new tax law? As with all things in the tax world, proactive steps can save from headaches at tax time. Three specific tips that can help include a review of the following:
- Withholdings. It is generally wise to increase tax withholdings if you expect the changes to lead to an increase in your tax obligations. This is because a failure to meet your tax obligations can result in penalties.
- Real estate. The new law has changed the deduction that is allowed for mortgage interest. Previously set at $1 million, the deduction rate will now drop to $750,000. This includes both the primary residence and any additional pieces of real estate. It is important to take this into consideration when making decisions regarding real estate purchases.
- Retirement. Consider increasing contributions to retirement accounts if the tax law results in a decrease in tax obligations. This can serve two purposes. In addition to setting you up for increased financial security during your sunset years it can also further decrease tax obligations as tax deductions are available for certain contributions.
Hopefully these steps will help ease your transition into the new tax rules.
What if the Internal Revenue Service (IRS) contacts my about my returns? It is important to take any contact by this agency seriously. Reach out to an experienced tax lawyer to help better ensure your interests are protected.
