Here Chris Heerlein, author of Money Won’t Buy Happiness – But Time to Find It,  and Investment Adviser Representative and partner at REAP Financial LLC, provides expertise on the little known tax breaks you could be making the most of.

The Tax Cuts and Jobs Act of 2017 gives us a lot to think about when crafting a financial framework. With the legislation scheduled to run through 2025, you want to be aware of certain provisions and exceptions in the tax-reform law and how you can take advantage of them.

State taxes

The tax-reform changes impose a $10,000 limitation on the deduction of state taxes. The IRS says that maximum does not apply to property taxes imposed on business property. For those of you with home offices, to the extent that you can allocate real estate taxes on your home to that office, understand that’s deductible outside or above the $10,000 limit.

Home equity lines of credit

If you take out a home equity line and use the proceeds to reinvest in your home, such as a new kitchen or a new wing in your bedroom, the interest remains deductible. But if you use those proceeds to, say,  pay off college tuition or credit cards, there’s no allowable deduction. We see families borrowing money on their home to use for repairs, improvements, and sometimes even to cover retirement income and keep their tax bracket under control. Borrowing home equity can be good, but you need to keep track of what you’re doing with the proceeds because if they’re invested in the home, you can still take a deduction.

Charitable contributions

These are deductible, as they always were, but the reason to be concerned about this category is the doubling of the standard deduction. Prior to the new tax law, only about a third of people in the United States actually itemized deductions. And after this increase in the standard deduction, guess what? It goes down to less than 10% of Americans.

Think about that: 90% of people will claim a standard deduction. Now, why does that affect charitable contributions? Well, as you may know, you can claim a deduction for a charitable contribution only if you itemize. If you don’t itemize and take the standard deduction, you get no tax benefit for charitable contributions. But here are some workarounds:

For people over the age of 70 ½ — the age when you have required minimum distributions on your IRAs and 401(k)s — there’s something called a qualified charitable distribution (QCD), and you can take up to $100,000 out of your IRA each year and basically have it sent directly to a qualified charity. This is a wonderful strategy for families that give small amounts and large amounts. And you avoid all tax on that distribution that ends up at the qualified charity. You can claim the standard deduction and still avoid tax on the IRA required distributions, but remember, the first dollars you give to charity should be money out of your IRA.

What about those of you younger than 70½? Here’s what you might want to do. This is a little outside the box but it’s a powerful strategy. Bundle several years or so of contributions to your qualified charity. Let’s pull five years out as an example. You can actually bundle these contributions into a single year so that you will go over the standard deduction in that one year and claim a deduction for the excess contributions. A Donor Advised Fund (DAF) is when families put money into the fund, they get the full tax deduction for whatever goes into the fund that year, plus they can distribute that money over time, at their direction. I recommend this a lot of times to clients, especially those taking the standard deduction.

Entertainment and meal expenses

There are some big changes when it comes to entertainment expenses and meal expenses. The new tax law disallows any deduction for entertainment expenses period. Meals — an integral part of business dealings, of course — are a bit different. The IRS says you can still deduct the meal expense as long as you have a separate receipt. Going forward, make sure that your food costs for clients are separately stated on those invoices and receipts. That’s a big one and can add up fast.

Then there’s the very important SSA-44 Form. Let’s say you’re a high-wage earner and you are going to work half the year when you retire at 65. You get off the employer health care plan and go on Medicare. Well, the government dictates your Medicare premiums by how much income you report. If you go over these thresholds, you are going to get a letter in the mail that says, “You’re Medicare premiums are going up.” And I’m talking perhaps $500-plus per person more for the same coverage your neighbor is getting. The SSA-44 Form is something you would file with your tax return in a year that you retired and were over these income limits, and they’ll give you a once-in-a-lifetime exception around those limits.

For many, it can seem like a daunting task, so is there anything you can do to make the process easier? Here James Foster, Commercial Manager at specialist accountancy provider Nixon Williams, provides some top tips on completing the process.

The majority of the working population have their tax deducted at source from the company that they work for, however, anyone that is self-employed has to complete a self-assessment tax return in order to be taxed appropriately on their earnings by Her Majesty’s Revenue and Customs (HMRC).

When you start working for yourself, your workload includes everything that you might need to do to make your business a success – from marketing and advertising to admin and ordering stationery. You may find that managing your finances is more complex than you might have expected as you will need to keep records of all the money you spend in the running of your business, as well as how much you earn. Many people decide to use the services of a professional accountancy firm like ours to help them through the process, but some decide to manage everything themselves. Either way, there are some simple things you can do to make the process as straightforward as possible, so here are my top five tips:

• Get organised – compiling all your invoices and receipts ahead of time is the best way to alleviate last minute stress when it comes to self-assessment forms. Ideally, you’ll have kept some form of spreadsheet or an online portal up to date throughout the year of your accounts, and you can use that to finalise your tax return. But if that’s not the case, don’t wait until the very end of January to get started. There are often missing pieces of information you’ll need to track down, so give yourself plenty of time to work through everything. And don’t forget – if it’s your first time completing your Self-Assessment Tax Return, make sure you’re registered with HMRC in time.
• Know the key dates for completion – If you decide to complete your tax return online then the deadline for this is any point up until the 31^st January, whereas a paper tax return needs to arrive with HMRC by the 31^st October the previous year. If you haven’t sent an online tax return before then you will need to register and HMRC advises you to do this no less than 20 working days before the deadline.
• Separate your work and personal bank account – a number of self-employed people operate with just one bank account for personal and business use, but this can make it hard to separate out your business expenses from your personal expenses. It’s often easier to identify which costs are related to your business by having a separate business bank account. This will not only help you keep a track of your business expenditure throughout the year, but it will make your life a lot easier when it comes to your tax return.
• Know the expenses and tax reliefs that you can claim – if you are a sole trader, for example, make sure that you know the expenses that you can claim in your tax return, as there may be some items you might forget about such as business mileage and expenses relating to working from home. It’s also beneficial to know about other tax reliefs that you are entitled to such as personal pension and gift aid payments.
• Tax returns can be complex so use an accountant – having professional support can be really beneficial because an accountant should not only assist with the compliance side of things (i.e. helping you to file your tax return on time) but they will also give you pro-active advice where appropriate. Tax returns are something most accountancy practices deal with on a daily basis from April to January, alleviating a lot of the financial stress away from clients and helping them to focus on what they do best – making a success of their business.

Running your own business and managing the many tasks that come with it can often push your tax return submission to the bottom of your ever-growing pile of work to do – but help is always available from professionals with the right experience and knowledge of the latest legislation.

There’s nothing like waking early on Christmas morning and rushing downstairs to open your online tax return...

It may not be your idea of a fun Christmas tradition, but if you use the extra time off over the festive period to get your tax return sorted, you can see in the New Year with a clear conscience and a paid bill – instead of the guilt pangs and nagging worry that hit the 5 million people who are still likely to be putting it off.

You don’t have to devote Christmas Day to it; there are endless less exciting days over the festive period, when a tax return may actually help break the monotony. You have to ask yourself whether you usually have a particularly memorable 28^th December – and whether you’ll really be missing out if you spend a few hours with your tax return instead.

5 tricks to make your tax return simpler

1. Check you can get into the system in advance

Before you do anything else, sign into the Government Gateway. If you’re doing it online for the first time, you’ll need to sign up, and wait up to seven days for your code to arrive. If you’ve used the system before, sign in now and check you haven’t forgotten your log in details.

2. Spend some time on your preparations first

If you’re not great at filing, don’t try to do everything at once: day one should be about tracking down paperwork, and ordering copies of anything you can’t find.

This includes certificates for savings accounts or dividends, pension statements, proof of any employment income and a P11d. If you work for yourself, you’ll want bank statement, sales invoices, receipts for expenses and paying-in books. If you received income from letting property, you need letting agreements, and bills for expenses and management fees.

3. Make sure you’re claiming for everything you can

Check that you’re claiming for all the reliefs and exemptions available to you. This includes pension tax relief and gift aid for higher rate taxpayers. Government figures show that only 22% of higher rate taxpayers claim the additional relief on gift aid they’re entitled to – but it can really add up.

If it seems like a lot of bother to claim for something, check if there’s a simpler option. If, for example, you are self-employed and work from home, you can do the calculations and count some of your household bills as expenses. Alternatively you can just use the flat rate of £10 a month for 25-50 hours a month, £18 for 51-100 hours, and £26 for 101 hours or more.

4. If in doubt, get help

There’s loads of great information on the HMRC website, which has really improved in recent years. You can find the answer to almost any question that’s likely to crop up. There are also plenty of guides and videos offering tips to save you time and money.

If you can’t find what you’re looking for, then other than on Christmas Day, Boxing Day and New Year’s Day, you can phone the self-assessment helpline. Unfortunately, the closer you get to the 31 January deadline, the busier the helplines get, so you could spend some time on hold. However, if you stick with it, you can get the guidance you need.

5. If you’re going to need an accountant, get a move on

If you already know that nothing will persuade you to touch your tax return over Christmas, be honest with yourself about whether you’re going to need an accountant to sort it for you, and contact them before the break. Don’t leave it until January, when accountants are snowed under, and many won’t have the time to take new clients on. Professional help will typically cost between £100 and £300, so you’ll need to decide if it’s worth the expense.

It's that time of year again. Revenue agencies are expecting you to mail in your annual income by April 30^th 2017.

Along with this, it is encouraged to submit any costs or expenses that may lower your annual income. Those could include: childcare expenses, new home ownership, medical expenses, charitable donations, and more. The CRA (Canada Revenue Agency) website now hosts many new updates, including ways to maximize your tax benefits, credits and deductions.

Being up to date on your taxes is something you will want to get educated on. Its value and importance is something we should all take the necessary time to become literate in.

After all of this is done, calculations provided by CRAs tax forms will determine whether or not you will be getting money back (income tax receivable), or if you will owe money (income tax payable).

For those of you who are lucky enough to receive a refund, consider your financial goals. This money could be used to better your financial situation, such as:

1. Paying down debt – If you are prepared for a financial emergency, then the general rule of thumb is to pay down your debt. There is a freedom in being debt free. Some suggest paying off the smallest debt first so you can feel the satisfaction of having one debt entirely paid off. However, both approaches have their merits.
2. Paying down the mortgage – One of the biggest benefits of paying off your mortgage is having long-term financial security. Without the heavy burden of a mortgage to pay every month, you will be able to enjoy financial security for a long time. Once the mortgage is paid off, you will have extra breathing room in your monthly budget, freeing up some more money to pay off other debts.
3. Invest in RRSPs – Putting some cash into an RRSP will serve as your retirement income later in life. Investing in RRSP's will also reduce your tax payable amount on last year's income.
4. Put it into a TFSA – You also have the option of putting your refund into a Tax-Free Savings Account. A TFSA is almost like a savings account, but it is registered with the federal government. The key benefit of a TFSA account is that you do not have to pay taxes on earnings.

One of the most common reasons why many Canadians get into debt trouble is that they make uninformed financial decisions that can sometimes have a very negative result. By using your tax refunds wisely, you will be making a smart choice that benefits you long term.

(Source: Money Mentors)