New tax code, new tax deduction rules

U.S. & World

(NBC) – Consumers will see significant changes to their returns this tax season as the tax cuts and jobs act goes into effect. Among the changes, the standard deduction nearly doubled, now $12,000 for single taxpayers and $24,000 dollars for joint filers.

Megan Gorman, Personal Finance Expert, says, “If you make small donations to charity and you keep receipts, going forward you might not need to do that.”

The Tax Policy Center estimates 27 million fewer taxpayers than 2017 will itemize deductions under the new rules.

Gorman adds, “‘Bunching’ is the new tax trending word in how to handle charitable deductions.”

Taxpayers can set up what’s called a donor-advised fund to “bunch” together future annual donations into one year with an immediate tax deduction.

According to Gorman, “Then you have the rest of your life to give the money away.”

The child tax credit also doubles this year to $2,000 dollars per qualifying child. Get more out of that extra money by putting it towards a 529 Education Savings Plan.

Gorman advises, “If you use it for a child’s qualified education costs, it comes out tax-free.”

Tax prep companies are beefing up software and live support to help taxpayers navigate the new changes, assistance that may be in high demand with the IRS operating on less than 60% of its workforce due to the government shutdown.

The IRS says it plans to process returns and issue refunds on schedule, but the full impact remains unclear, one reason to file sooner rather than later.

More criminals may be tempted to take advantage of reduced IRS staff to submit fraudulent returns. Just another reason to file early!
 

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