The upcoming tax preparation season in Hawai’i, according to some accountants, will be one of the most complicated in at least 3 decades.
The Federal Tax Cuts and Jobs Act will go into effect for the 2018 tax year. It includes some of the most sweeping changes in 30 years. But, Certified Public Accountant Reg Baker, says the Hawai’i Legislature did not adopt the Federal tax code.
“For 2018, we’ve got Federal rules and regulations that have one set of changes which Hawai’i has elected not to implement, which means they have to prepare their returns based on the old 2017 rules. It’s gonna get complicated.”
Baker recommends connecting with your tax preparer before the end of the year in order to look at options to reducing your tax liabilities.
“You can make some decisions as far as how much you wanna make as a charitable contribution or maybe a retirement plan contribution. If you’ve got a self-employed business you might have some options on how to manage your income – you know – deposit checks in January as opposed to December which is the common practice. But, just having that dialogue with your tax preparer could pay off very well.”
The 2018 Federal tax code will save taxpayers money, overall. The standard deduction doubled to 12-thousand dollars for an individual and 24-thousand for a married couple filing jointly. But, other federal deductions have been capped or eliminated, including the popular Home Equity Line of Credit loan or HELOC. Charles Au is a CPA...
“They’ve done away with the deductions for HELOCs. It used to be under the old law that if you borrowed up to $100-thousand against your home, it didn’t matter what you used the money for. You could use it in your business: deductible. You could use it to go to the Bahamas: deductible. The way that it is now, zero. Home mortgage interest used to be that you could borrow a million dollars and deduct interest on it. That’s changed. Any acquisition after December 18 of ’17, the max is $750-thousand.”
Federal deductions for charitable donations and State and Local Taxes or SALT have also changed dramatically. CPA Baker says preparing separate Federal and State tax returns could end up costing 20-30 percent more for filers.
“I’ve been doing tax returns for 30 years and ever since my college days they’ve been talking about tax reform. And, it’s taken 30 years to get there but we finally have something that approaches tax reform but it certainly doesn’t simplify anything. So, simplification was something lost in the process.”
For HPR News, I’m Wayne Yoshioka.