Andrew Lattimer

Tax season is now in the rearview mirror with the 2018 filing season the first since the Tax Cuts and Jobs Act of 2017 (TCJA) came on the books, an act that presented the single biggest change in U.S. tax policy since the Tax Reform Act of 1986.

This sweeping legislation altered the nation’s tax landscape, leaving many taxpayers none too pleased about owing the government, when in previous years they had received a refund. If there was one lesson learned about the inaugural TCJA filing year, it’s about withholdings. The promise of wider brackets and lower rates may have lulled many taxpayers into a false sense of securing a sizeable refund. But with fewer deductions and less of an incentive to itemize, the offset result for some was a smaller refund than expected and for others, the sticker shock of owing.

Now that the tally is in, many will be looking to make changes to their withholdings in 2019 and beyond. A couple points to consider – are you better off keeping your withholdings down during the year and then dealing with whatever comes your way at tax time? Or does increasing withholdings now to ensure no big surprises come next April a better fit for your comfort zone? Does having more money in your paycheck during the year offset a possible financial bind when that tax bill comes due?

The “no more personal exemptions” edict will remain in place for 2019, but on a positive note, the child tax credit rules can help minimize the loss of exemptions and itemized deductions for some families. The Child Tax Credit under TCJA allows up to a $2,000 deduction for each qualifying child, with the cut off age at 17. The refundable portion of the credit is limited to $1,400, however this amount will be adjusted for inflation for the 2019 filing year, and hopefully beyond.

You may have learned a lesson this past filing season in standard deduction versus itemized deduction. This was a major sticking point for many taxpayers, considering the limitation placed on deducting state taxes. Will itemizing be to your benefit or will the new $24,000 standard deduction work in your favor? Now is the time to begin coordinating your deductions for the best results next year.

Your focus, in terms of the new tax laws, were likely on the above “big issues” last year, so you may have left some adjustments on the table that might have decreased your tax burden. If you regularly make charitable donations, look into a donor advised fund.  In short, this is a separately identified account maintained by a section 501(c)(3) organization.

Say you typically donate $10,000 to charity. Rather than giving the annual $10,000, you could accelerate the next three years’ worth of donations. In that way, you’re able to realize the benefit of a “bunched” charitable deduction for that year.

The bottom line is that a new tax era takes some time to become adjusted to; you need to become educated about these dramatic changes and fully understand their nuances, so you can realize maximum benefit. The first tax season of TCJA is officially over – take a very quick breather and then start asking the questions and making the adjustments to ensure a “no surprise” 2019 filing season.

Andrew J. Lattimer is a tax partner with business advisory firm blumshapiro.