By Dwan Payne | ACS Financial ReadinessMarch 11, 2019
It's TAX TIME -- Are you ready?
If not, now is the time to gather and organize your tax records. April 15 will be here before you know it.
Research reveals the "earlier you begin preparing your documents, the more likely you are to have a smooth tax-return experience." Maybe you have already done your taxes; did you notice any changes? Was your refund much less than last year? Maybe you are curious why there was a variation from last year?
Albert Einstein stated, "The hardest thing in the world to understand is income tax." Just when you think you are close to understanding what you can deduct, something changes. This year is no exception.
As you may or may not recall, a massive tax reform bill was passed, representing significate tax changes for Americans. Some tax breaks that you might have taken advantage of in the past are gone. This is said to be the "largest mass change in 30 years."
If you filed your taxes already, you may have noticed many "tax deductions were cut, reduced or eliminated in 2018." It is important to understand how the new changes impact you.
There are numerous tax deduction modifications. Attached are some of the biggest changes to pay attention to.
A key part of the Tax Cuts and Jobs Act involves the standard deduction. According to tax officials, "It has been estimated only 10 percent of tax payers will benefit by itemizing."
Other changes include:
• Lower tax rates -- based on one's income
• Mortgage interest deductions can only be taken on mortgage debt up to $750,000. Home equity interest will no longer be a deductible in 2018.
• The marriage penalty has been eliminated for everyone except married couples earning more than $400,000 annually.
• Alimony is no longer a deductible or taxable.
• Child tax credit increased from $1,000 in 2017 to $2,000. $1,400 is refundable (even if no tax liability).
• Non-refundable credit of $500 for children over 17, living at home and are out of school
o The Lifetime Learning Credit, Student Loan Interest Deduction and exclusion for graduate school tuition waiver remains the same.
o The 529 college savings plan, to include levels of education other than college, will change. For example: If you have children in private school or you pay for tutoring (K-12,) you can use the money in your account for these expenses.
• Unreimbursed business expenses are no longer deductible.
• Tax preparation fees are non-deductible.
• Taxpayers can deduct charitable contributions/donations of as much as 60 percent of their income under the new tax plan.
• No penalty for those who don't buy health insurance per Obamacare.
• SALT (State and Local Tax Deduction) will be kept, but limits the total deductible amount to $10,000 including income, sales and property taxes.
What changes might impact military personnel?
• Moving expenses. PCS moves are more specific but are still deductible from:
o Home to the area of the first change of station
o One permanent change of station to another.
o The last change of station to home or to a nearer point in the United States. Armed forces members must move within one year of ending active duty or within the period allowed under the Joint Travel Regulations.
o 18 cents per mile, parking fees, and tolls
o Can do actual expenses, but exclude general maintenance, repairs, insurance and depreciation
o MeaIs are no longer deductible.
For Reservists, one can deduct expenses if:
• Travel is more than 100 miles (one way)
• Staying overnight to attend drill or a reserve meeting
• Deducting mileage and federal rate for per diem
• Moving household goods and personal effects at reasonable travel and lodging expenses -- meaning the shortest most direct route (with no sightseeing)
• You can deduct the cost of shipping your car and household pets to your new home.
• You can deduct the costs of moving your household goods and personal effects from a place other than your former home. The deduction is limited to the amount it would have cost to move them from your former home.
• You can include the cost of storing and insuring household goods and personal effects within any period of 30 consecutive days after the day your things are moved from your former home and before they are delivered to your new home.
• Not included in income:
o Moving or storage services furnished to the armed forces member
o Nontaxable allowances, such as:
Temporary lodging allowance
Mileage allowance in lieu of transportation
Per diem allowance
Move-in housing allowance (MIHA)
• Combat zone extensions have been granted
o The clock starts 180 days past the tax filing season -- beginning the "last day in a combat or hazardous duty area OR
o The last day of any continuous hospitalization for injury from service in a combat zone or qualified hazardous duty area."
There is an array of options as you prepare your return. If your finances are not very complicated, you can probably prepare the return yourself. Most tax payers file their returns electronically. This is the easiest and "most accurate way to complete your return."
For 2018, the 1040 tax form has been updated. It is not as complex. Simple standard filing is predicted to be easier to understand and complete.
It is estimated that "nearly 60 percent of individuals pay preparers to complete their tax returns." However, the average cost is $125-$150 an hour for a basic return. Why pay to have your taxes prepared? Costs continue to increase from year to year, but guess what -- if you are a Military ID cardholder, the Fort Knox Tax Center prepares taxes for free.
The preparers are IRS trained and certified to assist service members, retired Soldiers and their families. By calling (502) 624-0044, you can set up an appointment at your convenience. The Tax Center is located in the basement of Building 1310, Pike Hall on Third Ave.
Other sources to consider include:
• Military One Source -- militaryonesource.mil. Online H&R Block software is available for self-preparation for free.
• Volunteer income Tax Assistance Program (VITA) provides free tax advice and preparation, return filing and other tax assistance to military members and their families based on income. Visit http://irs.treasury.gove/freetaxprep/.
o There are more than 200 VITA sites in the Louisville area that provide free tax preparation. For information call Resilience and Community Services at
(502) 574-4377 or (502) 305-0005, or visit https://louisvillekyvita.cascheduler.com.
These sites partner with Louisville Asset Building Coalition, Metro United Way, and Louisville Urban League.
o AAFES offers a contracted vendor for tax assistance, as well. At Fort Knox, H&R Block is available on at the Main Exchange. Services cost for preparation. AAFES gives back a portion of their profits to Soldiers and Families through the Directorate of Family and Morale, Welfare and Recreation. So essentially, if you must pay to have your taxes done, why not give back to your military community.
"Tax professionals vary in their level of skills, education and expertise."
To avoid future audits or penalties, you should know your providers' "credentials, and qualifications prior to obtaining their service." It is important to select a service that is familiar with military pay, benefits and entitlements to avoid any red flags. Certainly, the lingo and acronyms alone can be enough to confuse some preparers let alone the questions that involve current IRS rules.
I agree, preparing one's taxes can be confusing. It takes preparation, time, effort and understanding in how the new tax laws might impact one's financial affairs. Going forward, however, reevaluate your tax strategies. Now is the time to consider the right steps to make sure you are on the road to financial success. These steps could maximize new advantages and minimize potential hits from tax changes.
Filing taxes is a significant part of your financial plan. If you haven't already, I would encourage you to gather your information together and set aside time to accomplish this task sooner rather than later.
If you have other personal financial questions or concerns, call (502) 624-5989 to schedule an appointment with a financial counselor at the ACS Financial Readiness Program. Financial Readiness Program provides financial education and individual financial counseling for Fort Knox.