There are major changes coming to tax payers both this year and beginning in 2019. Here are a few things you need to know.
Divorce – Alimony Rules Have a Big Change:
It’s bad enough suffering through a divorce (I have no personal experience) but beginning with divorce settlements finalized January 1, 2019 or later there are major changes to the tax law. The alimony payer (mostly men), can no longer deduct alimony paid on their taxes. AND, recipients (mostly women) of alimony payments will no longer have to declare the payments as income. This is a huge tax differential that never existed before.
So if you are a man, you want to get the divorce finalized now and if you are a woman, probably not!
Self-Employed – Nice Boost:
Starting in 2018 if you are a small business owner, self-employed, independent contractor or “gig” employee you will get a new 20% federal tax deduction on your income. In other words if you were paying taxes on say $10,000 of income, or in the case of a LLC business Net Profit, under the new tax rules you will only pay tax on $8,000 of it! This falls under the new “pass-through” allowances that also apply to business such as a REIT, BDC or MLP. This is a pleasant surprise!
Stop Collecting Those Receipts:
For most people who collect and document all of their medical expenses for you year, you can probably stop now. The standard deduction is so high now, $24,000 (married filing jointly) and for us senior citizens it jumps to $26,600, we will most likely not be itemizing deductions ever again. Besides currently unreimbursed medical deductions must exceed 7.5% of your adjusted gross income to be counted, this jumps to 10% starting in 2019.
There are more year-end tax tips and I’ll cover them in a future article.