It’s everyone’s favorite time of year, or maybe at least Uncle Sam’s: Tax Season. There are some new updates to the tax code and other important considerations to consider when putting together your filings this year. Don’t worry though, I’ve outlined some of the key updates and considerations to keep in mind as you start the process.
As you’ll notice, the widths of the brackets have widened since last year and the top-tax bracket has been reduced from 39.6% to 37%.
Other important updates include:
A higher new standard deduction of $12,000, compared to last years $6,350.
No personal exemption allowed, compared to last year’s $4,050 (reducing the benefit of the increased standard deduction to only $1,600).
The married filing jointly income thresholds are exactly double the single thresholds (vs. previous marriage penalty in some cases).
Interest on home equity debt can no longer be deducted at all (vs. $100,000 in home equity debt available for consideration).
Taxpayers can deduct charitable donations of as much as 60% of their income (vs. a 50% cap previously).
How should you file?
TurboTax – You can file your return in as little as 10 minutes, depending of course on how complex your filing is. You can take pictures of any tax forms for an easy upload. The app is free and the e-filing for federal and state returns start at just $39.99.
H&R Block Tax Prep App (Tii:HRB) – Import feature allows you to take pictures of your W-2’s or 1099 MISX forms for easy integration. This app is also free to download and will automatically check for any errors or omissions. You can expect to pay between $40 and $70 for e-filings.
QuickBooks (Tii:INTU) – If you own a small business or do some freelance work, this is your best option due to the complexity and different revenue streams. You can take pictures of business receipts throughout the year (or at the end all at once) for deductions in the app. It can even help you track work mileage throughout the year for more deductions. The download is free, but it costs $5 a month for the integrative software.
I personally use TurboTax to file my taxes. Its integrative user-friendly software takes a lot of the grunt work out of the rudimentary process that filing can be. The simple Q&A format works well in guiding you through all your taxable accounts and TurboTax allows you to review your final filing (as it would appear on paper) before you submit to the IRS. TurboTax also allows you to check on the status of your tax return through their app, so you’ll remain updated as it moves through the process.
All in all, this year’s tax changes will affect everyone differently and it might be best to consult an accountant if your return is more complex. While it might cost more, the savings from identifying additional areas to reduce your taxable income could exceed or make up for the additional costs. Best to get started sooner rather than later as well, in case you are missing some documents.
