Lessons from this year’s tax preparation

Your 2017 taxes are done. Congratulations! But you’re not done yet.

While you have all your tax forms and documents handy, this is the perfect time to analyze last year’s finances and use those insights to prepare for the big changes that will occur in 2018 and beyond. The sooner you get started, the sooner you can start planning that summer vacation.

Avoid a big tax refund: What’s not to like about found money? A lot! A tax refund is really just the return of a yearlong, interestfree loan that you extended to Uncle Sam. You can do much smarter things with that money, like putting it into a retirement plan or a college savings fund or maybe paying down outstanding debt or replenishing your emergency reserve fund.

If you received a refund of more than a few thousand dollars, check out the revised IRS withholding tax calculator on IRS.gov. After doing so, you may want to adjust your W-4 at work. If you’re self-employed, lower your quarterly estimated tax payments accordingly.

Be careful about home mortgage interest: As of Dec. 14, 2017, the new tax law mandates that you can only deduct interest for new home loans up to $750,000 (the previous limit was $1 million). It also limits the interest deduction on home equity loans. It’s now only legit to deduct if you are using the loan to “buy, build or substantially improve” your dwelling.

So if you were planning to use a HELOC to pay down higher interest auto, boat or student loans, you’ll need a Plan B.

Be smart about charitable gifts: The new tax rule nearly doubles the standard deduction to $12,000 for single filers and $24,000 for those who are married and file jointly. That means those who previously were itemizing and therefore entitled to deduct charitable contributions, may no longer get Uncle Sam’s help for their cause.

One way to legitimately sidestep the rule is to bunch the charitable gifts you would have given over multiple years into one year so that you would itemize and then be entitled to the deduction. You could also consider a donor-advised fund, offered by most of the big investment firms. The vehicle allows you to put money or highly appreciated securities into the account, take the deduction in the year that you do so, but then gift to your favorite charity whenever you want in the future.

Don’t pay for high school with a 529 plan yet: Yes, the new law expanded the use of 529 savings plans for K-12 private school expenses, but some states are not going along. Instead, they are still treating any non-college withdrawal as a nonqualified distribution and could charge you penalties.

Be careful with Roth conversions: If your tax bracket is dropping, this year could be an excellent time to convert your traditional IRA into a Roth, according to Ed Slott, CPA and IRA expert.

“I like the Roth, because it removes the uncertainty of what your future tax bill might be.” Carefully consider the tax consequences of the conversion and maybe even wait until the fourth quarter when you know more about this year’s income.

Preview your 2018 taxes: After tax season, check in with your accountant or financial pro and ask her to create mock 2018 returns.

Michael Goodman, a certified financial planner, said that many of his clients who feared the worst about their new tax situation, were pleasantly surprised to find that it was not as bad as feared.