MINNEAPOLIS (WCCO) — As the holidays approach, taxes may be the last thing on your mind, but financial experts say early tax planning is crucial this year.
It’s always good to plan ahead, but this year the federal tax code had the most dramatic overhaul in decades. There are things you could do now that could save you hundreds or thousands of dollars come tax time.
There are three big points you should know relating to the 2018 federal tax code.
Kyle Spicer, a CPA and tax manager, says first thing’s first, it’s important for everyone to look over their withholdings as soon possible before year’s end, since the IRS updated its withholding tables.
“It’s important because there are many new opportunities to save money,” Spicer said. “A lot of people are not withholding enough because just of the way the charts work, and you want to avoid that surprise come April 15 if there’s a big tax burden.”
Second, you should figure out if you will want to use the standard versus itemized deduction this year. The federal tax code nearly doubled the standard deduction up to $24,000 for joint, and $12,000 for single.
“Most of the time people that are itemizing have mortgage interest, state taxes, real estate taxes and a lot of charitable contributions,” Spicer said.
Third, Minnesota did not conform to the federal tax changes, so it may still make sense to itemize your state taxes. And if you’re undecided? You should make the most of your good will.
“Potentially bunching some of those charitable contributions by making a lot of contributions in one year versus spreading them out year-to-year so you get the most tax benefit,” Spicer said.
Obviously every person or family is different, but Spicer said higher earners in a high tax state like Minnesota may get hit harder when filing for 2018 taxes because the federal tax overhaul included a $10,000 cap on deductions for state income, sales, and property taxes.
If you’re not sure if how much you should be withholding in your income, there is a free tax planning calculator on the IRS website.