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Check Your Tax Exemptions in Order to Avoid an April 15th Surprise

Posted on in Estate Planning

Elgin tax planning lawyerThe federal government recently passed the Tax Cuts and Jobs Act (TCJA), which has ushered in major changes to tax laws that will affect nearly every business and individual taxpayer. It is critical to understand these sweeping changes so that you can anticipate your tax burden each year.

According to the Tax Policy Center, under the TCJA, approximately 67% of taxpayers will owe less taxes, 25% will have no change in their taxes, and 7% percent will owe more taxes. However, this may not mean that taxpayers will receive a refund next April.

For most, whether a refund is issued depends on how much tax one pays through income withholding. Experts predict that because the government has reduced the withholding amounts to reflect the reduced taxes, between one third and one half of taxpayers may have a balance due with their next tax return.

This lower withholding, as well as the loss of some popular itemized deductions, translates into taxpayers (especially those with higher incomes) being more likely to owe taxes at the end of the year. 

Exemptions Are Only One Piece of the Puzzle

Exemptions can help you prepare for Tax Day, but there are other aspects of your tax return that can affect your tax liability. You should also look into ways that you can reduce your Adjusted Gross Income (AGI) through “above the line” deductions. These deductions often significantly reduce your tax burden. Common above the line deductions include contributions to 401(k)s or traditional IRA plans and student loan interest paid.

You can also reduce your tax liability through deductions that reduce your taxable income. First, you should determine if you have deductions that are greater than the standard deduction, which has recently been raised by the TCJA. For many people, the biggest itemized deductions are mortgage interest paid and gifts to charity.

Contact an Elgin Estate Planning and Wealth Protection Lawyer

If you believe that your tax strategy is not fully optimized, you should speak to an attorney. Taxation is one key part of estate planning and wealth protection. If you do not understand tax laws and do not keep up with changes to the tax code, you are likely to lose money.

At Ariano Hardy Ritt Nyuli Richmond Lytle & Goettel, P.C., we represent and assist clients with all their tax planning needs. Analyzing income tax returns is often the starting point for reviewing a client’s finances. Our attorneys stay abreast of any new laws that could be beneficial or harmful to your finances. Not only will we keep you compliant with tax laws, but we will also try to leverage the law so that you see maximum results.

To schedule a free consultation, call an experienced Kane County estate planning and wealth protection attorney today at 847-695-2400. 

Source:

https://www.kiplinger.com/article/taxes/T055-C032-S014-to-avoid-tax-surprise-check-your-withholding-now.html

https://www.thebalance.com/tax-planning-basics-3193487

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