A nonprofit publication of the Kentucky Center for Public Service Journalism

It’s tax time: Here are credits and deductions individuals can leverage to maximize tax savings

By Suzanne Danks
CPA, Rudler, PSC

If you were one of the many Americans surprised by your tax return last year, you’re not alone. The shock came to many as a result of the vast changes to the Internal Revenue Code through the Tax Cuts and Jobs Act (TCJA), which went into effect in 2018. Here are some of the changes that impacted taxpayers the most in 2019 and recommendations on strategies to leverage that can help maximize your return this year:

Suzanne Danks

Standard deduction vs. itemizing – Taxpayers should determine whether or not to itemize deductions (which could make filing more complicated) or take the standard deduction based on their filing status. The TCJA nearly doubled the standard deduction for each filing status. Between this and the reduction or elimination of many itemized deductions, some taxpayers who previously benefited from itemizing may be better off taking a standard deduction this year.

State and local tax deduction – Your entire itemized deduction for state and local taxes, which includes property tax and the greater of income or sales tax, is now limited to $10,000 for an individual or $5,000 if you’re married but filing separately. Because of this, it may be more beneficial to deduct sales tax instead of income tax, especially if you purchased a major item in 2019, such as a car or boat.

Child, dependent and adoption credits – While the TCJA reduced or eliminated many tax breaks, it actually expanded tax credits for families by doubling the child credit and adding a “family” credit for dependents who don’t qualify for the child credit. You may be eligible to claim a $2,000 credit for each child under the age of 17, and a $500 family credit for qualifying dependent children over the age of 17 or elderly parents living in your home by the end of 2019. Did you adopt a new child in 2019? Then you may qualify for the adoption credit or employer adoption assistance program income exclusion – both are $14,080 for 2019. However, for higher-income taxpayers, these credits are subject to an income-based phase-out.

Charitable donations – Only itemized deductions to qualified charities are now fully deductible, which means you may no longer save because of the increased standard deduction. One strategy to adapt here is to “bunch” your donations into alternating years if your total itemized deductions in those years would surpass your standard deduction. You’ll also want to consider alternative strategies for larger donations. For example, if you have appreciated publicly traded stocks that you’ve held on to for more than a year, you can give these as a charitable gift and deduct the current fair market value to avoid the capital gains tax you’d pay if you sold the property.

Filing your taxes can be a stressful event, especially for Americans who are working two or more jobs, claiming children or other dependents, had itemized deductions in 2018, have higher incomes, and/or are a two-income family. Ensuring that you have all of your necessary tax documents can make filing a bit easier. However, for complex filing situations, leveraging the advice of a tax advisor can help you navigate these changes and ensure there are no surprises in your return this year.

Suzanne Danks is a senior manager at Rudler PSC.

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