For all the drama over the recent overhaul to the tax code, there’s a good chance actually filing your taxes in 2018 — hopefully by the April 17 deadline — won’t be all that different from whatever you did last year, assuming you didn’t experience a big life change. (It might be a different story if you recently bought a home, changed jobs, got married, or had a kid.)
That’s because when the IRS begins accepting 2017 tax returns on Monday, it won’t yet be playing by the new rules, which kick in for your 2018 returns instead. Of course, the very fact that your tax situation could be different next filing season is a good reason to get a head start on assessing your options right now — particularly those that might change.
For single filers with fairly straightforward tax situations, one big factor to consider is whether you will benefit from itemizing this go-around. Starting next filing season, the standard deduction will get significantly more generous, moving from $6,350 to $12,000. That will make using itemized deductions like the mortgage interest or charitable deduction much less useful for many people who currently itemize, said Lisa Greene-Lewis, a CPA at TurboTax.
“The standard deduction for 2017, whether you’re single or married, that is almost doubling [next year],” she said. “That’s one thing to think about, if you itemize your deductions.”
Plus, some of the deductions available to homeowners, job-changers and more, are being scaled back or eliminated entirely. In other words, this might be your last change to maximize your refund by using certain tax breaks.
For one? It’s likely your last chance in the near future to take a deduction on moving costs you incurred changing jobs: If you relocated 50 miles or more in 2017 — and held that job for at least 39 weeks or more in 12 months following your move — many of those expenses are still tax deductible, including the costs of any professionally-required medical or education exams.
In addition: They stay the same for now, but when you file 2018 taxes in 2019, both state and local property tax deductions and mortgage interest deductions will have new caps. (That said, as CNBC reports, there’s a legal fight ongoing to stop the changes.)
Of course, even if you didn’t move, get a new job, or buy a home last year, there are still nuances that can trip people up, perhaps why nearly half of millennials said they are worried about making a mistake on their return, according to a recent survey from H&R Block.
Here are five tips to help you glide confidently through tax season this year — and take home the biggest possible refund at the end.
1. Thwart thieves by filing early
While it may be true that the actual deadline for filing your taxes isn’t for months, there’s a strong argument for doing it sooner rather than later, particularly if you’re expecting a big refund. For one, the IRS is expecting refund checks to go out more slowly this year as its streamlined staff juggles processing last year’s returns with implementing the new changes.
But the best case for filing earlier? More than 174 million private financial records were exposed last year in leaks like the breach at Equifax, according to the Identity Theft Resource Center. If a thief can get a hand on enough of your personal information, they might try claiming your refund on your behalf.
In the 2015 calendar year, the IRS stopped or blocked nearly 5 million suspicious returns. The sooner you get your hands on your refund, the sooner you can thwart identity thieves and put that money to work by investing it or stocking it into an interest-bearing savings account.
2. Don’t forget the best tax perks
Even if you didn’t change jobs or buy a house last year, there still may be deductions or exemptions that apply to you, some of which will go away when the new tax bill fully takes effect. Greene-Lewis said that young people in particular should look into whether they have a qualified dependent that they can declare, since that is one of the perks being phased out.
“People who are supporting a boyfriend or girlfriend, they used to be able to get a dependent exemption for them, and this will be the last year you can do that,” she said. “That’s up to $4,050. It could be a relative as well, in which case the relative doesn’t need to live with you, while a non-relative has to live with you all year.“
Other perks that aren’t going anywhere but may actually apply to you? One of the most popular is the student loan interest deduction, which will allow you to deduct up to $2,500 in student loan interest that you paid off in the last year. If you can take the deduction, your lender will send you a form known as the 1098-E which will tell you how much interest you paid. If you didn’t receive a form, you can also check to see how much interest you paid by going over your account statements.
If you spent 7.5% of your income on medical expenses, from doctors fees and insurance premiums to smoking cessation programs to guide animals — even related transportation costs — you can claim the medical expense deduction. If you have a home office space in your house or apartment that you use regularly and exclusively for business, you can likely deduct a portion of the expenses associated with it, including utilities, repairs, rent, and insurance.
Finally, you might already know that if you donated any money to a qualified charity, you can claim the charitable deduction. You can also get it if you donated property: That includes giving unwanted clothes to the Salvation Army or Goodwill. Expenses incurred while volunteering for a recognized charity, like travel or lodging costs, are deductible as well.
3. Check for mistakes that trigger penalties
You’re supposed to pay taxes on all of the money you made last year, not just the income from your primary employer. Reporting extra income often means reporting the income from a second job, or perhaps rental income, or even gambling winnings. If you are a self-employed freelancer, you’ll have to submit a separate form, known as the 1099. Even if you sold any investments in the last year, like a cryptocurrency like bitcoin, you’ll also have to calculate and pay a capital gains tax.
While this tip might seem counterintuitive — since it means you’ll pay more tax than you might have realized — it’s far better than being caught under-reporting your income: The IRS will charge you an additional penalty of roughly 20% of your underpayment as punishment.
You also want to do everything you can to avoid the possibility of an audit, a costly process might even include face-to-face interviews. During an audit, the IRS can also review your returns for the last six years, and asses any new fees or penalties that they find.
Amusingly enough, the IRS even offers instructions that you report income you came by illegally (if you prefer stealing property to cash, you report the fair value of the item you stole in the year you stole it). Do with that what you will.
4. File for free, even if you make pretty good money
If you make less than $66,000 annually, and your tax situation is simple, there’s no reason why you should be paying anything for tax filing: The IRS has a directory of tax software that you can use to calculate and file your taxes for free, though the exact qualifications differ slightly from website to website. Credit Karma is also offering free filing this year, regardless of income.
If you’re willing to do a little extra work, you can alternatively file for your taxes for free using the IRS’s free file form, though it warns that it “offers only basic guidance” and you’ll still need to file your state taxes separately.
5. Get ahead of the future
Remember to take advantage of surprising last-minute moves you can make to tamp down your taxes — such as contributing to a tax-advantaged retirement account like an IRA to lower your taxable income, and therefore how much you end up owing Uncle Sam. You can continue making IRA contributions that count toward 2017 all the way through April 17, 2018, according to the IRS.
This deduction is available to you at any income level if you are single and don’t have a retirement plan at work. And if you do have a retirement account at your job, you can claim at least a partial refund if you’re an individual filer with an income below $72,000.
Finally, while you’ve got your forms in front of you, you might also get ahead of next year’s tax planning by double-checking your withholding amount. If your tax refund is particularly large this year, if you changed jobs, or if you have a new dependent — for example a child, parent, or even roommate that you’re supporting financially — then you should consider changing the number of withholdings you’ve declared on your W-4.
To figure out if the right amount of money is being withheld from each paycheck, you can reach out to your employer’s HR department to discuss updating your form.
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