Some of the ways to increase your deductible under the new tax law include paying off your home loan or simply enlisting for a car donation pick-up service as part of an aggregated charitable contribution.
Whichever you choose, it’s important to consult first with an accountant on the best way to comply with changes under the Tax Cuts and Jobs Act.
Most people have looked into donating their old car as a way of reducing their income taxes, but this doesn’t just involve handing over your vehicle to a charity. You should check if the organization is recognized by the Internal Revenue Service as a 501(c)(3) or a religious group. Some accountants advise their clients to itemize their donations to maximize the tax savings.
Otherwise, called “bunching,” it involves itemizing donations within the last two or three years and declare them for a single tax year.
The new tax law will also eliminate the interest you pay on your home equity loan when you use the money aside from buying or renovating a house. This also applies for payments using your credit card, which should be paid off first since banks charge a higher interest rate.
If you are planning to pass on your home as an inheritance in the future, the beneficiary may incur capital gains taxes when the person decides to sell it immediately after receiving the estate. The new regulations increased the estate and gift tax exemption by up to $11 million per person.
The tax reforms entail a long-term commitment on your part, whether you are a salaried employee or an entrepreneur. The impact of the changes will be clearer in the next few years, but working with your accountant as early as now should give you an idea how to maximize every deductible penny from your taxable income.