Advisor: It's not too early to think about 2018 taxes
FARGO—This time of year, many people are getting ready to file their 2017 tax returns, but with the tax overhaul that was recently approved by Congress and signed by President Donald Trump it's not too early to start thinking about the 2018 tax year, according to one Fargo area tax preparer.
"The way you calculate your taxes in 2018 is going to be different than 2017, which is really not much changed from prior years. It's 2018 where we're going to see the changes," said Kent Busek, a partner at Busek Olson & Associates, which advises businesses on tax matters.
Busek is also an owner of Taxman, which prepares individual tax returns.
On the individual side, Busek said the new tax tables essentially double the standard deduction for singles, married couples, or married individuals and heads of households filing separately..
While that is a major change, Busek said it may not alter things too much for North Dakota taxpayers, as information provided in the past by the state tax commissioner's office indicates most state residents tend to take the standard deduction rather than itemize.
On the business side, one of the big changes for 2018 is the 20 percent deduction allowed for pass-through business income for certain types of businesses, such as sole proprietorships, LLCs, partnerships and S corporations.
For example, a small business that generates $100,000 in profit in 2018 would be able to deduct $20,000 of that amount before the ordinary income tax rates are applied.
Busek said anyone who owns a small business that might benefit from the deduction should consult with an advisor, as the calculation of pass-through income can be complicated.
"It needs to be pass-through income versus compensation income," Busek said.
"Some professions aren't eligible to take the deductions.You may want to consider changing your corporate structure to take advantage of the lower rate," Busek added.
When it comes to individual tax returns, Busek said one segment of American households—those with incomes roughly between $150,000 and $300,000—have historically missed out on some tax credits.
The tax overhaul, he said, should improve the situation for those households.
"They're going to see substantial tax savings," Busek said.
Aside from the tax overhaul, Busek said there are some things people should always be paying attention to, such as whether their employer offers to match part of what workers sock away in their 401K account.
"A lot of people don't take advantage of company matches. If you put money in your 401K, take advantage of that, get started on it right away.
"You'd be surprised how many people don't take advantage of that," Busek said.