Source: Andrew Zumwalt, 573-234-4268
COLUMBIA, Mo. – Holiday shopping is in full swing for consumers around the nation. Shoppers spend money. Money comes from income. And where there’s income, taxes follow.
Congress is in the middle of reforming the federal income tax code, but whether a new code emerges, the earliest it would take effect is 2018.
“Right now, taxpayers need to concentrate on the current tax year,” says Andrew Zumwalt, assistant extension professor of personal financial planning with University of Missouri Extension.
With 2017 drawing to a close, Zumwalt recommends a few basic year-end tax moves for all income tax filers to consider, especially if they itemize deductions.
“First, start building the folder,” Zumwalt urges. “Have a readily accessible place where all the tax-related paperwork goes.”
This includes such things as receipts for charitable donations, medical expenses and work-related payments not covered by employers. The same file will also serve as a collection point for all reportable income forms (W-2s, 1099s, etc.) that make their appearance after Jan. 1.
“If you’re unsure whether an expense will be deductible, put it in the file anyway. You can sort them out during filing season.”
Second, be sure to take full advantage of any flexible spending accounts you may have established for medical and dependent care expenses. Generally, it’s a use-it-or-lose-it proposition, says Zumwalt.
Third, if you have a dependent attending college, you can receive a tax credit for higher education payments you make in the calendar year, according to Zumwalt. “You may also want to accelerate payments for next year to the current tax year.”
Finally, depending on the outcome of tax reform, taxpayers may want to accelerate other deductible expenses (such as charitable donations, and real estate and personal property taxes) from next year, by paying them before Jan. 1, 2018. The reason, says Zumwalt, is that if any of the current tax reform proposals become law, the standard deduction could double, making it harder to itemize. Another consideration is real estate and personal property taxes may no longer be deductible.
“Those possibilities could completely eliminate the value of deductible expenses for filers who won’t exceed the potentially new standard deduction in 2018.”
So, while you joyously anticipate the holiday season, don’t forget to keep an eye peeled for potential year-end tax-saving moves. They may help cover those post-holiday bills.
For more than 100 years, University of Missouri Extension has extended university-based knowledge beyond the campus into all counties of the state. In doing so, extension has strengthened families, businesses and communities.