School is out. The fireworks have been shot (except for the stashes of my neighborhood's teens, which based on prior post-July 4 experiences, probably will last another week). And the heat is definitely on.
That means it's finally, fully summer.
And that means that it's time to get down to some serious summertime tax moves.
Yes, I know you want to head to the pool or beach or catch up on neglected novels or just be generally lazy. I'm right there with you.
But those recreational pursuits will be a lot more enjoyable if you know you've taken some easy steps to lower your 2018 tax bill. Here are five you can tick off in no time.
1. Adjust your withholding.
I know, I know. I say this all the time. If you got a big tax refund this year or owed Uncle Sam, you need to reassess your payroll withholding. But a withholding review is especially true now that the tax rates and income brackets have changed under the Tax Cuts and Jobs Act. The Internal Revenue Service has created a new W-4 and revised its online withholding calculator to reflect the changes. Make good use of them now while there are still six months for the changes to be reflected in your paychecks.
2. Boost your nest egg.
If your paycheck checkup produces some added income, use that to add to your retirement accounts. This includes your workplace's 401(k) plan, as well as your IRA, either traditional or Roth.
3. Finish up your charitable spring cleaning.
You went through your house a couple of months ago and donated a ton of stuff you no longer needed. But admit it. You're still dealing with a lot of clutter. Give it another look, especially if you itemize. Given that some Schedule A expenses are now limited under the new tax law, your charitable donations become even more tax important. Plus, your favorite charity will really appreciate getting your gift, be it cash or household goods or some other more uncommon form of donation, since summer tends to be slow for nonprofits.
4. Review your health needs.
For 2018, the itemized medical expense deduction still has the easier to clear threshold of 7.5 percent (instead of 10 percent, which takes effect in 2019) of adjusted gross income. Given the new, larger standard deduction amounts, this could be the last year you'll be able to make use of this or any other Schedule A claims. To ensure that you can claim medical expenses and maximize them, look into what URL tax-allowable medical treatments you can schedule for this year. Doing so now instead of in a rush at year's end will be better for both your health and your taxes.
5. Hire your children.
You love your kiddos, but you hate all their summertime whining about being bored. If you own your own business, hire them. It's a win-win-win. You'll know what they're up to (and can make sure they aren't bored!). They'll earn some cash, which, admit it, you would have given them anyway. And you'll get some tax breaks, like deducting their wages. Plus, you don’t have to bother with Social Security, Medicare or federal unemployment (FUTA) taxes for your younger-than-18 summer employees.
As for the youngsters, they will be subject to tax on their earnings. But unless you're an unbelievably generous boss, your young workers also will be in in a low tax bracket, probably the lowest given the expansion of the brackets under the new tax law. And the now $12,000 standard deduction for single taxpayers means that much (or all, again unless you're a very well-paying boss) of your child/employee's income is essentially tax-free to him or her. An added bonus is that your children can start developing good financial tax habits by putting at least some of those earnings into their own Roth IRAs.
More July tax moves: There. That didn't take too long. Now you can get back to your regularly schedule summertime activities.
If the five tax moves in this post or some of the others listed in the adjacent column apply to your personal tax situation, take advantage of them. The tax savings they could provide might just help pay for your well-deserved summer vacation.