The Answer Desk: Federal tax changes
We got lots of calls from earlier this evening, as our panel of Certified Financial Planners answered your questions about federal taxes.
In the short term, nothing will change: the federal forms you file by mid-April will offer the same deductions as in the past.
However, Dennis Hebert, with Blue Ocean Strategic Capital, points out you can do some things before the end of this year to take advantage of deductions you may not have in coming year. For example, he says you should pay your January property tax bill in December, and the same for your January estimated tax payment, because it's entirely possible those deductions will be eliminated for the forms you'll fill out in 2019. You might want to pay big bills, like medical bills this year as well, to get the tax advantage.
Even though most of our callers were concerned about future taxes, our panelists also reminds that there are still deductions to take advantage of now: you can get federal tax credits for donating clothes and household items before the end of the year. Sue Hansen, from Hansen's Advisory Services, says the end-of-year cleanups can be dropped off at thrift stores. She also reminds that end-of-year checks to charities and not for profits will give you a tax deduction, but they must be postmarked or paid by credit card before Dec. 31.
Congress is expected to vote on Tuesday, on the tax reform bill. To be clear, it will not affect Social Security, or Medicare, or state programs like STAR exemptions. However, Ted Sarenski from Blue Ocean Strategic Capital says the changes will affect everyone: the standard deduction will double for everyone, but personal exemptions will go away. As a result, fewer filers will need to itemize deductions, simplifying the tax process.
However, Federal Income Tax forms will probably never be as simple as the originals: in 1913, the 1040 form was 3 pages long, and came along with 17 pages of instructions. Don't count on the coming forms to be that simple, or short!