To get the finances in order, it is necessary to have the tax planning for 2018 in order. It ensures that one makes all the right money moves next year. It is important to know how the federal tax reforms can be benefited. One must know how the new tax bill will impact them as the reforms may lead to some paying more and some paying less tax. Here are five tips for tax planning in 2018 one must consider.

• Get organized
  It can be frustrating that one has to stop with everything and start tax planning for 2018 by searching for statements and receipts.

Some organization foresight can help reduce the stress. It is a smart idea to have a good record keeping system for filing statements and receipts of the whole year as this will make tax planning for 2018 easier. Make copies of all the returns and keep them in a safe place. Consider taking a back up on thumb drives or other devices that are separate from the computer as it can be stolen or hacked and you may lose the electronic copies. The standard rule is to retain returns and keep the documents for at least three years. Also, certain important documents should be retained for a longer period like the statements that reflect the amount paid for properties and investments, especially if the properties and investments are not sold.

Track the state-level changes
Tax reforms that are enacted at the federal level have an impact on the state tax policies as well. More than half of the states have their tax codes that have been tied to federal rules. Also, there are frequent adjustments based on what happens at the federal level. The tax reform has not only removed various deductions and exemptions at the federal level but also lowered the federal income tax rates. At the same time, many states will cut their own tax rates. It is predicted that to respond to the projected revenue increase, the state legislature will look at an array of legislative policies and options. This increases the chances of some states lowering their income-tax rates. This is an important point to consider while planning taxes for 2018. Some of the places that have projected revenue increase as a result of the federal tax reforms include Georgia, Michigan, Minnesota, Arizona, Nebraska, Colorado, New York, and Maryland.

Ponder on the capital loss
For most of the prior nine years, the stock market has been up sharply, and the investors didn’t have any position where they lost money in their portfolios. However, that’s not the case anymore as the stock market of 2018 has been red most of the times. Hence, it makes sense to harvest the positions where money is being lost and reinvest the proceeds of the same in some other investment. Realized gains and realized losses offset each other for tax purposes. To the extent that one has losses that exceed the gains, up to $3,000 of the excess can be deducted against ordinary income on an annual basis. Net losses that are beyond $3,000 can also be carried to future years.

Consider Roth Individual Retirement Accounts (IRAs)
Withdrawals from Roth IRAs are tax-free, which is why one should consider them while tax planning for 2018. Roth IRA withdrawals do not push one into the higher tax bracket and potentially do not even make the Social Security benefits taxable (assuming one is drawing Social Security). The notable drawback when one moves or converts the traditional IRA money into a Roth IRA is that one can pay taxes on the amount that they are transferring. However, this is the perfect time as the stock market is becoming lower from flat. Ordinary income tax rates have been reduced after the tax reform and the tax bite could be smaller as compared to that in the past. If one decides to do a Roth IRA conversion, preferably non-IRA money should be used to pay for it.

Have a tax refund strategy
Most people receive a tax refund and spend it by paying off the debt or place it in savings. Usually, for most people, the refunds represent a large chunk of money. In some cases, the refund is the largest amount of cash received all year. A potential tax refund problem is that the withholding amounts could drop for a lot of people, which implies their refunds next year could also be lower. If one relies on refunds to put their finances in order, it might be time to come with some other backup plan. This is because refunds imply that one has paid too much money to the government during this year and has missed out on the income that could be an investment on which one could have earned an interest.