You probably haven’t even filed your 2017 taxes yet, so it may feel a little premature to be preparing for your 2018! But if you start now, at the beginning of the year, you’ll have a much easier time doing your taxes when 2019 rolls around next year. Here are some tips to start your year off right:
– Figure out if you will be taking the standard deduction or itemizing for 2018. The standard deduction for both individuals and married couples filing jointly has increased and if you’ve been just over the standard deduction in the past, chances are great that you’ll just want to take the standard deduction for the next year which means you won’t need to keep such scrupulous records.
– If you plan to itemize and will be making deductions for a home-based business, be sure to keep all your records and receipts so you have them at the end of the year. Keep diligent track of your mileage (there are apps to help!), and keep all of your receipts well organized.
– Also, if you’re an independent contractor, be sure you’re setting aside money each month to pay your taxes in 2019. It can be tempting to spend all of the money you bring in each month, but you’ll be hit with a giant tax bill that you’re unprepared for if you’re not setting aside approximately 30% each month.
– Start contributing early to your retirement plan. Around 50% of Americans have no retirement savings and yet, if you’re under 50, you can contribute up to $18,500 to a 401(k) this year. If you’re over 50, you can contribute up to $24,500 to a 401(k). Contributing anywhere near that much at the end of the year can feel daunting, so if you start contributing a little each month starting now, you will have saved a sizeable amount by the end of the year. This money goes tax-free into your retirement account although you will be charged taxes when it is pulled out eventually. Even if you don’t have a 401(k), you can still save up to $5,500 in an IRA if you’re under 50 or up to $6,500 if you’re 50 or over.
– If you have medical expenses, keep track of them diligently as you can deduct medical expenses that exceed more than 7.5% of your adjusted gross income in 2018. This includes money you pay out-of-pocket for cop-pays, prescription drugs, etc.
How will you begin to plan for your taxes this year?