Personal Finance Expert Ted Bauman on the New Tax Bill
President Trump kept one of his promises when he signed the new tax law passed by Congress just before Christmas. That gave taxpayers a small window of time to learn about the adjust to the changes in the law. Because the new law raised the standard deduction, many people taking various deductions would no longer be able to effective in 2018. Since most people are on a cash basis, it was to their advantage to prepay various kinds of expenses for 2018 while still in calendar year 2017. Go To This Page for more info.
One of those types of expenses was interest on student loans. Congress did not eliminate the deduction for this expense. However, because of the higher standard deduction in 2018, most people would save money by prepaying their 2018 student loan interest while still in 2017 so they could deduct it from their 2017 taxes.
Bauman’s next tax tip was to buy a new car in December 2017 so you could deduct the sales tax you had to pay the state in 2017. Make sure you keep the receipt.
Bauman’s next tax tip was for independent contractors who live in states with high income taxes such as New York and California. He advised them to ask their clients to pay them for 2018 in 2017.
Bauman’s advised employees who live in states with high income taxes to ask their employers to pay any bonuses due in January in December.
People who live in states with high taxes benefited by receiving more income in 2017, so they had to pay higher state taxes on it. Therefore, they could deduct larger amounts of state taxes. However, people who live in states with low or no income taxes were better off delaying the receipt of income until 2018, when tax rates on it would be lower.
Also because of the higher income deduction effective with 2018, it would make sense for some taxpayers to convert their conventional IRA to a Roth IRA. Taxpayers with conventional retirement accounts should calculate the benefit they would receive by converting, to see if it would make sense according to their individual situation.
Ted Bauman joined Banyan Hill Publishing in 2013. He’s now their Editorial Director, and still produces three newsletters and services: Plan B Club, Smart Money Alert and The Bauman Letter. Born in Washington D.C., as a young man Bauman emigrated to South Africa. He graduated from the University of Cape Town with postgraduate degrees in History and Economics. See more:http://sovereignsociety.com/meet-the-experts/ted-bauman/