The Tax Cuts and Jobs Act (TCJA) enacted into law in December 2017 introduced the most far-reaching changes in the tax code since 1986. The new law reduced taxes at almost every level of taxable income, shifted the thresholds of several brackets, and, overall, made filing much easier by offering a generous standard deduction.
But convenience comes with a cost. In their rush to make managing taxes easier, millions of U.S. taxpayers left money on the table. According to TurboTax, the tax software program created by Intuit, in 2018, those who itemized claimed $1.2 trillion dollars’ worth of tax deductions, while those who chose the standard deduction received a fraction, at $747 billion.
In the first of a two-part series on individual tax tips, business reporters have a timely story to look into that will help their readers claim all the deductions they’re due this tax season by asking these questions:
Did you leave money on the table in 2018?
Did some of your readers shortchange themselves last year? Study this list of the top 10 most overlooked deductions in 2018. If so, did they file an amended return? Why or why not? Are they choosing the standard deduction in filing their 2019 taxes, or itemizing? What influenced their decision?
Read this backgrounder on the TCJA’s impact on personal taxes from the non-partisan Tax Policy Center in Washington, D.C. before tackling this topic.
Do you know about the tax credits and deductions available in 2019?
What tax deductions for 2019 are Certified Public Accountants (CPAs) seeing their clients overlook this tax season? Congress enacted several new tax credits and deductions for non-itemizers in 2019.
Read this list and then develop an online quiz for readers. How many know about these tax credits and deductions?
Do you know that filing early is smart?
Filing early reduces the risk that a thief can steal a refund and gives taxpayers time to pay any money owed to the Internal Revenue Service (IRS). Filing early also gives you time to take advantage of all the tax breaks available. The TCJA raised the income threshold so that more parents can claim the $2,000 tax credit allowed for each child, and deduct 20, or 35, percent of up to $3,000 of childcare costs. Tax breaks also include these “above-the-line” deductions:
- A $1,000 contribution to an Individual Retirement Account (IRA) saves a taxpayer in the 24 percent tax bracket $240;
- Mortgage interest of up to $10,000 on homes bought after Dec. 15, 2017;
- charitable contributions, including donations of clothes, books and other noncash items;
- a deduction of up to 20 percent of a self-employed business owner’s income.
Develop a panel of readers that reflects these financial profiles. Have your CPA work with them to calculate their taxes both ways—standard vs. itemized deductions—to decide which choice is the most advantageous. This IRA publication for individuals, and this IRS publication for businesses, will fill in the details.
In the next part of this tax series, learn about how you can help your working-class families with valuable tax tips.