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Filing season doesn't arrive until spring, but you'll want to act soon to take advantage of provisions in the sweeping tax law passed in late 2017. Experts say these are the biggest changes affecting taxpayers 50 and older and the steps you need to take before year's end to get your biggest benefit.
A boost for the self-employed
Starting in 2018, many independent contractors and small-business owners can get a 20 percent federal tax deduction on their business income. In other words, they’re liable for taxes on only $80 of every $100 they make. (The deduction starts phasing out if their total taxable income surpasses $157,500 if single, or double that if married and filing jointly.) Other math is involved, but the probable upshot is lower taxes if you become, or remain, a freelancer. For example, a self-employed architect making $40,000 a year would see her taxes cut $672, the Tax Foundation calculates.
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Do this now: Start the business you always dreamed of
Got a hobby or talent you’d like to monetize? Now’s a great time to try. You might also invest more in a business you’re already running, or, if you’d like a lighter work schedule, switch from employee to freelancer. In terms of taxes, “you can work the exact same job and be way better off being an independent contractor,” says Stacy Johnson, a CPA and president of Money Talks News.
A higher bar for medical deductions
Under the new bill, taxpayers this year can deduct unreimbursed medical expenses that exceed 7.5 percent of their adjusted gross income. Beginning in 2019, however, that figure rises to 10 percent.
Do this now: See your doctor and get your meds
If your medical expenses are already near 7 percent or higher, and if there’s something you want a doctor to check out, you might go now, says Ann Brownholtz, senior tax adviser for the financial advisory firm the Colony Group. You could also pay now for future medical expenses such as prescription drugs or medical equipment, says Johnson.