The recently passed Tax Cuts and Jobs Act, has left many Americans wondering about the impact of it on their finances, which is not surprising since such a major tax overhaul is the first since the 1980s.
- Hire an accountant
It might be wise to consult a tax professional to ensure that you have the right help to tackle the changes such as spotting any errors in your filing or helping you identify new applicable deductions .
- Run a projection
Making a projection of the amount of taxes you are likely to pay or will be returned to you will help you plan better. It will also enable you to file for an extension if necessary.
- Update your withholdings
Get in touch with your company’s HR representative to check about updating the withholdings per month from your salary. This will ensure that you are aware of the changes being made.
- Rethink buying or selling your home
Under the new tax law, mortgage interest is deductible only up to $750,000. Anyone looking to take a mortgage over this amount this year should considering consulting a financial advisor to evaluate the decision.
- Don’t count on deducting your moving expenses
The new laws has withdrawn the facility to deduct expenses if you have relocated specifically for a job. Check with your employer if they can foot at least part of the bill, especially if the move is not voluntary.
- Assess your retirement situation
Consider increasing the monthly contribution to your 401k or Roth IRA as it can help you in regards to managing your taxes long term.
- Reconsider taking out a home equity loan
Home equity loans will now be taxed differently as under the new rules. The amount was earlier tax deductible but now it will longer be so. Therefore it is expected that home equity loans will become more expensive moving forward.
- Don’t rely on a SALT deduction
Those living in states with high tax rates like New York and California will no longer be able to deduct state and local taxes . Therefore residents of such states, will be well served to start saving now.
- Double check on your commuter benefits
The tax breaks that had been in place for businesses to offer commuter benefits to their employees has been now removed. You should check with your employer to understand the changes to this benefit. However Personal contributions are still deductible up to $255.
- Assess your financial situation holistically
It is good time now to assess your financial situation holistically and review it against your long-term financial goals.