(WCMH) —Tax season is here, and if you’re like many Americans, you probably have a lot of questions: How should you file your taxes? When should you file them? Does the new tax plan affect you?
Here are the top five questions Americans are asking this tax season:
1. Will the new tax plan and jobs act affect you this year?
While the new tax bill is already in effect, it does not impact your 2017 tax return.
“Those are under last year’s tax rates,” said Greg Taylor, founder and CEO of Legacy Retirement Groupo. “When you file this time next year, it’s going to be under the new 2018 tax bill, so that’s when it’s going to affect you.”
2. What about deductions?
“The standard deduction and personal exemptions for a married couple for 2017 is $20,800,” Taylor said.
3. Should you defer your taxes or pay them today?
The answer to this question depends on your tax bracket.
“Those in the highest tax brackets perhaps want to continue to defer,” Taylor said. “Those in the lower 10, 12 and even the 22% tax brackets might want to consider paying their taxes up front and going into the Roth tax-free strategy.”
As far as retirement accounts in general go, Taylor also said that with lower tax rates right now, it would be smart to start paying more taxes up front and contributing to a Roth IRA instead of a traditional 401(K) or a traditional IRA. You’ll pay the taxes up front, but the money you contribute will grow tax-free and you’ll be able to withdraw it out tax-free.
“That can help you paying taxes on your social security as you get into retirement,” he said.
4. How does the new tax plan affect homeowners?
“Between your property tax, your mortgage interest, state and local taxes you have a $10,000 maximum,” Taylor said. “For many Americans, it will cover all those taxes and more and still make that pretty much even to where they were.”
For mortgages near the $700,000 and up, the $10,000 may not cover all of your property tax.
5. What about charitable contributions?
“A lot of people are worried that charitable deductions are going to decrease this year and a lot of that is due to the fact that standard deduction went up to $24,000,” Taylor said. “So a lot of people won’t be as motivated because they’re not going to have itemized deductions that are greater than $24,000 for the year.”
Taylor said one strategy — called bunching — allows you to double up your charitable contributions. You take the contributions that you make in one year and wait until the next year, and it will double up and possibly push you over the standard deduction. Taylor adds it’s important to find the right accountant, CPA or tax planner to help you.