9 Financial Resolutions for 2019

Nine financial resolutions to get your finances in shape for the new year.

If you’re like us, the last month has been a blur of excess—too much food, too much sugar, too much spending, and just plain too much stuff! But now that the new year has begun, it’s time to make those resolutions to eat better, get in shape, and get the house in order.

But are your finances in shape for 2019?

It’s never too late to get your financial house in order, but January is an ideal time to start with a fresh, clean slate. As you’re pulling those documents together in preparation for tax time, why not spend a little extra time cleaning out your financial clutter and laying the groundwork for a more stress-free year?

Here are 9 financial resolutions we suggest making right now for a healthier bottom line:

  1. Set financial goals. What more could you be doing to grow your money, increase profits, and spend or save more wisely? Write down your goals and determine steps you can take toward reaching them. Don’t let this step intimidate you—we’re not talking about major changes here. Start small. Maybe you’re looking to save more money for retirement, a major purchase, or a vacation? Try putting aside an extra $50 each week, or from each paycheck. Even just $5 more per week gives you $260 more at the end of the year.
  2. Create a budget. You know it’s a good idea, but it seems intimidating, not only because it’s extra work but because you’re worried you’ll discover you can’t afford things or will be limited. Here’s a secret the financial pros know: The opposite is true. When you make a good, detailed budget and adhere to it, you’ll be amazed by the feeling of freedom that comes as a result. When you’re designing a budget based on reality and that addresses every type of spending you do in a month (and even a bit for savings), you’ll realize that there aren’t any surprises. Your debts, your groceries, the gas for your car, the office supplies, the new shoes, even those dinners out … they’re all accounted for, and you’ll feel ready to tackle it all in the month to come. If you’re having trouble figuring out how to start, let us know—we’re happy to share tools and tips to get you off on the right foot.
  3. Invest in accounting software. Numerous tools exist to help individuals and small businesses keep track of their finances, from Xero to Quickbooks and more. When you put your financial details into a personal accounting system, you’ll get a clear picture over the coming year of where you’re spending—or spending too much. Perhaps you’ll also realize that you can afford to save or donate more than you thought you could. Your system can probably enable you to make a budget and help you stay on target each month. It may even help you to catch fraudulent activity more quickly since it allows you to look at all your accounts in one place and over time. The more you use it, the more data you’ll have in order to make wise economic decisions. Many systems even allow you to set up bill paying, which leads to our next resolution…
  4. Schedule automatic bill payments. In the end, we’re all human. We get busy, we take vacations, and statements occasionally get lost in the mail. But your most important bills—such as your mortgage, rent, and utilities—are due at the same time each month or each quarter. Why not take some work off your plate this year and schedule automatic bill payments through your bank, creditor websites, or personal accounting system? This will help ensure that you never make payments late or miss them altogether, which will ultimately help your credit score. Setting it up takes a bit of a time investment, but in the long run, it will save you time for other more important things.
  5. Keep credit in check. As of this month, the average American household has an average of $5,700 in credit card debt, according to a survey of consumer finances by the U.S. Federal Reserve. And this same research shows that the higher the credit card debt, the lower the net worth. If your holiday spending went on credit cards, resolve to get your debt under control and pay it off. Resolve to never charge what you can’t pay off in full the next month, or just stop using credit altogether. Set up automatic bill pay to ensure the full balance is automatically paid on time, every time. If your debt is too large to pay at once, start small. Pay your minimum payments each month, and put anything extra you can afford going toward paying off the smallest debt. Once that card is paid off, roll the payment into what you pay toward the next one.
  6. Plan to donate. As I discussed in my last post, the new tax laws will greatly affect how people donate to charitable organizations. When you’re creating your budget, figure out how much you can afford to donate each week, month, quarter, or year and set up automatic donation payments.
  7. Track mileage. Although the new tax code may make itemization unnecessary, it’s a good idea to start on the right track by keeping a close eye on expenses, just in case itemization becomes an option. One thing you can start doing is tracking your mileage. The IRS will allow business owners or independent contractors to either write off actual vehicle expenses or mileage, whichever is higher. A number of apps exist, such as MileIQ, Mileage Tracker, or MileLogger, to help you easily record mileage and calculate potential reimbursement. And be sure to keep a backup of this data elsewhere, just in case something happens to your phone or device.
  8. Plan IRA contributions ahead of time. This time of year, you may hear from your financial advisor that you can squeeze in last-minute contributions to IRA accounts without missing the April 15 contribution deadline. Then you’re scrambling to see what you might have lying around to put in. A better idea is to consult with your CPA to determine how much you can contribute in the coming year and set up automatic transfers each month. This is a much more pain-free method since we often don’t miss what we never felt we had to begin with. This is a particularly good method for self-employed individuals, whose income may fluctuate from month to month, making it hard to come up with unplanned IRA payments.
  9. Set up your CPA appointment! Accountants’ schedules are already filling up, and before you know it, April 15 will be here. Call to schedule your appointment today to get your tax filing done and out of the way, so you can enjoy any potential refunds even sooner.

From all of us at Ludmila CPA, have a healthy, happy new year!


Don’t Stop Giving! How the New Tax Law Affects Charitable Deductions

How the New Tax Law Affects Charitable Deductions

’Tis better to give than to receive — that’s what we’re always told around the holidays. Doing good for others should be its own reward.

But tax deductions are nice, too. For many, this is the time of year for businesses and individuals to give to charitable organizations and get that last-minute deduction from the current year’s taxes. In fact, for many who itemize deductions, the tax incentive has made the difference in whether they donate or not.

However, the 2018 changes to the tax code mean that although those deductions themselves haven’t gone away, you’ll have to cross a tougher threshold to get them. This is because the standard deduction went up considerably.

For individuals filing singly and married couples filing separately, the standard deduction went up to $12,000; for married couples filing jointly, nearly doubled to $24,000; and for heads of household, the new standard deduction is $18,000.

It’s going to be a lot tougher to clear these new, high standard deductions with itemization, so those who have itemized deductions to surpass the standard deduction in the past may no longer bother doing so. A congressional report estimates that only 18 million households will itemize deductions for 2018, which is way down from last year’s 46.5 million.

As a result, here’s the impact these changes could have on charitable giving:

  • Individuals who no longer need to try to snag that extra deduction may take a pass on giving altogether.
  • Some may start what’s called “bunching.” Businesses or individuals who typically give annually might hold off this year, opting instead to make bigger, more substantial donations the next year in order to surpass the standard-deduction threshold. For instance, rather than donating $5,000 per year, they may hold it back and donate $10,000 next year to try to surpass that standard deduction.

While, for sure, giving something is better than giving nothing, we don’t advise bunching. The problem with this strategy is that society’s needs and the work of nonprofits don’t stop when the tax law changes.

Many of these essential organizations rely on donation forecasts in order to develop annual budgets and plan events or service efforts. It’s going to be awfully hard for them to budget when those huge amounts only come every other year and get nothing in the intervening years, or when donors they’ve counted on in the past opt to save their money and reap the rewards of the standard deduction. Some organizations may even go under in such an unpredictable climate, which could have disastrous consequences.

If you’d like help planning your charitable contributions, contact us at Ludmila CPA.

2018 Tax Law Changes: What You Need to Know

2018 Tax Law Reform: What You Need to Know


When the Tax Cuts and Jobs Act (2018 Tax Reform) went into effect in early 2018, many were skeptical: The top individual rate went from 39.6% to 37%, and most individual tax bracket rates lowered, which seems like a great thing. The average working family saw savings this year to the tune of about $1,000, and you may have noticed a little extra change in your pockets. In this season of gratitude, you may be counting your blessings for that.

But as we all know, when it comes to our taxes, there are rarely cuts in one place without increases elsewhere, and for some, the changes may not be so welcome. As you start planning to file your 2018 returns, you’ll need to know what major differences are headed your way.

Here, we’ve broken down the biggest changes you can expect to see in your 2018 taxes:

Simplification is the name of the 2018 tax game. The primary goal of the new tax package was to simplify a tax code that many lawmakers felt was too complicated. In fact, for those who have filed a simple form 1040, things got even simpler. Watch for the postcard form 1040. You’ll be done even sooner than before.

The general trends went as follows:

  • Corporations saw huge tax cuts from 35% to 21%.
  • The standard deduction replaces itemized deductions.
  • An overall reduction in tax revenue may affect services.
  • Nonprofits may suffer with the loss of itemized deductions as incentive.
  • Families with young children saw fewer taxes while those with older children see more.

The standard deduction was virtually doubled. The standard deduction, which is the amount the IRS lets you deduct from your taxable income without question, significantly increased this year. The deduction for single taxpayers went from $6,350 to $12,000; for those married and filing jointly, the deduction increased from $12,700 to $24,000; and for heads of household, the deduction went from $9,350 to $18,000. So if you’ve always itemized deductions, if your deductions usually came to less than these new standard deduction amounts, you may see a lessening of your tax burden this year, as well as a simplification, since there’s no longer any point, for most middle-class taxpayers, in itemizing.

Miscellaneous expenses can no longer be claimed as itemized deductions. Until 2018, certain expenses could be deducted from your taxes: tax preparation (your accountant fees), work-related expenses (such as the costs of a home office, a job search, your business licenses, mileage and gas, and more), and the fees you pay your financial advisor or broker for managing your money and investing. Those are gone, suspended until 2025. So, too, are moving expense deductions.

Again, the standard deduction replaces these deductions—which may or may not be a good thing. For example, if you’re a single taxpayer, you’ve itemized in the past, and, with your miscellaneous expenses, the total amount you were able to deduct last year came to $10,000, you’ll benefit from not having to itemize this year and claiming a $12,700 standard deduction instead. But on the other hand, if your itemized deductions, including miscellaneous expenses, got you $15,000 last year, the difference between that and this year’s $12,700 will be noticeable and perhaps painful.

Personal and dependent exemptions are gone. In the past, taxpayers could reduce their adjusted gross incomes by up to $4,050 per personal exemption, for themselves, their spouses, and each of their dependents. Those exemptions are no longer allowed. Again, the standard deduction increase was intended to offset this, but if you’ve benefitted from these exemptions in the past, you may see an increased tax burden if the total might otherwise have taken you over the standard deduction threshold.

The child tax credit increased. Last year, the tax credit per qualifying child was $1,000, but this year that amount is $2,000. Up to $1,400 of it can be received in your tax refund, and the rule includes a $500 nonrefundable credit for each dependent besides a qualifying child (for example, a foster child or a disabled relative). Up until 2018, the credit was phased out by $50 for each $1,000 the taxpayer earned beyond certain thresholds—$75,000 for singles and heads of household, $110,000 for married couples filing jointly, and $55,000 for married couples filing singly. That phaseout has been adjusted in the new tax code to start at over $200,000 for singles and $400,000 for married couples. In other words, even those with six-figure incomes may not see any reduction in their child tax credits.

Other changes include expansions of the allowable 529 distributions for education, adjustments to the allowable deductions for mortgage income or medical expenses, and many more.

For those who own rental properties, own small businesses, or conduct frequent investment activities, you’ll still want to work with a CPA to ensure those documents.

The bottom line? Much about the tax code has changed, and it’s likely to affect you. We’re here to explain these changes to you in language you understand. Contact us today with your tax questions. We’re ready to help.