- Changes in tax law could mean that 4.5 million taxpayers will owe more money when they file taxes in April.
- A number of tax deductions have been reduced or eliminated.
- Taxpayers who itemize deductions can take steps to avoid unexpected taxes.
- Are married
- Itemize deductions
- Have two children under age 17
- Have income over $180,000 from one or more jobs
- Have $20,000 or more in non-wage income (such as interest, dividends or capital gains)
- A $10,000 limit on state and local tax deductions
- A restriction on the deduction amount for home mortgage interest
- The elimination of the deduction for job-related expenses
The tax reform bill signed late last year includes many changes for taxpayers, including one that might take people by surprise. Many deductions have been reduced or eliminated, so many taxpayers will have fewer deductions to reduce their taxable income.
The Government Accountability Office recently released a report saying that over 4.5 million U.S. taxpayers could owe income taxes next April unless they adjust their withholding allowances.
Click to read about the 10 most expensive states to file taxes.
Who Will Be Affected by Tax Deduction Changes
Taxpayers who itemize deductions should look carefully at how those deductions will change. According to the GAO, those taxpayers likely to see a significant change in the amount they can deduct are those who:
Taxpayers who meet these criteria are highly likely to be hit with a bigger tax bill when they file their 2018 tax return next April.
Find Out: 15 Tax Tips and Tax Deadlines to Know
How Tax Deductions Have Changed
Many deductions have changed since the tax bill passed, but there are three that will have an impact on a large number of taxpayers, according to the GAO. They are:
What You Can Do to Minimize Taxes
If you want to be sure you don’t get a nasty surprise next April, check your withholding with the IRS Withholding Calculator. Using a recent pay stub and tax return, this tool will help you determine if you are having enough money withheld from your paycheck each week or month to cover the taxes you will owe for the year.
If the calculator indicates that you need to adjust your withholding, you’ll need to submit a new Form W-4 to your employer. Once your employer processes the form, your withholding will be adjusted for the remainder of the year.
Adjusting your withholding now might prevent you from having to pay additional income tax or a penalty in April 2019.
Click to keep reading about tax loopholes that could save you thousands.
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