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2019 Tax Update

‘Tis the season … to file your taxes! 5 things to consider when filing your taxes this year and 1 thing to be aware of.

It may not be as fun as the holidays, but ‘tis the season for filing your taxes! And, some things have changed since you filed last. Late 2017, sweeping tax reform changes were signed into law, making this the first tax season the changes take effect. Here are 5 things you need to know this tax season:

  1. Tax brackets have changed – One of the biggest changes was the adjustment of the tax brackets — there are still 7 brackets as in years past, but tax rates have been reduced for most. For example, in 2017 a married couple filing jointly earning $50,000 a year, would have a tax rate of 15%. This year, that same couple would have a tax rate of just 12%.1

 

  1. HELOC interest is still tax-deductible … sometimes – Home Equity Lines of Credit (HELOC) have long been used for a myriad of things including paying for higher education or paying off credit card bills. But, under the new law you can only deduct interest paid toward a HELOC that was used for home improvements, like a remodel or an addition.2

 

  1. The Child Tax Credit has doubled – Under the new tax code, the Child Tax Credit increased from $1,000 to $2,000 per qualifying child under the age of 17. You may also be eligible for a $300 credit for each dependent that isn’t a child.3

 

  1. 529’s are for more than just college – In the past, 529 college savings plans were for just that – college. But now, you can use that money for other educational expenses including private school or tutoring. The best part? The money will grow tax-free while your child grows.4

 

  1. Contributions to retirement accounts are still tax-free – One thing that didn’t change with the new tax reform is that contributions to retirement accounts and the interest earned are tax-free until they’re withdrawn. In other words, by saving for your retirement in an account such as an individual retirement account (IRA), you could be reducing your taxable income now and setting yourself up for success later.5

 

If you didn’t contribute to an IRA in 2018, set one up now to help reduce the taxes you’ll owe next year and start earning interest. Contact the team at Auburn State Bank to learn more.

Warning: Fraudsters are trying to steal tax-refunds – Over the past few years, criminals have started impersonating the IRS to trick innocent tax-payers into paying them money. Remember – the IRS will not initiate contact with you by phone, email, text message or social media. If someone claiming to be the IRS contacts you through one of these channels, don’t reply or share your information.

This article is meant to be educational. Please visit IRS.gov or contact your tax professional for further details.

1 https://www.kdpllp.com/2017-vs-2018-federal-income-tax-brackets/

2 https://www.schwab.com/resource-center/insights/content/is-interest-on-heloc-still-tax-deductible

3 https://turbotax.intuit.com/tax-tips/irs-tax-return/2017-tax-reform-legislation-what-you-should-know/L96aFuPhc

4 https://www.daveramsey.com/blog/tax-reform-bill

5 https://money.usnews.com/money/retirement/articles/2018-10-29/how-to-use-retirement-accounts-to-reduce-your-2018-tax-bill

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