Ep.60 – Tax Season Tips with Ed Slott

With tax season in full swing, it’s time for some much needed tax tips, dos and don’ts, and sage advice about IRAs and backdoor conversions.

As crazy as this might sound, you may want to enjoy this tax year while it lasts, because come next year, it’s going to get a whole lot crazier with all the changes to the tax code.

While almost all of the changes go into effect next tax season, one big change occurs this year. If you itemize deductions on Form 1040, Schedule A, the new law allows you to deduct qualified medical and dental expenses that exceed 7.5 percent of your adjusted gross income (AGI) – that’s a lower threshold than the previous 10 percent. (The level returns to 10 percent beginning January 1, 2019.)

Medical care expenses is a big category and you should check out the IRS list, because it includes payments of fees to doctors, dentists, surgeons, chiropractors, psychiatrists, psychologists, and nontraditional medical practitioners, as well as insurance premiums you paid for policies that cover medical care or for a qualified long-term care insurance policy.

With new withholding tables in effect, the amount may not be enough to cover a lot of taxpayers, especially those in high tax states who could lose certain deductions. To be safe, at least for the first year of the new law, you may want to assume that your tax liability will be at least the same as this year. To avoid a penalty, you can pay 100 percent of your income tax liability from 2017 or 110 percent if you earn more than $150,000.

To get a better sense of your situation, be sure to check out the revised IRS withholding tax calculator on IRS.gov.

And oh yeah, once again, due to a Washington DC holiday (Emancipation Day), the filing deadline is delayed. Procrastinators, mark April 17th, rather than April 15th as your drop-dead date.

“Better Off” is sponsored by Betterment.

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