Review your financial situation to adapt to new tax law

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With the new tax act taking effect this year, many taxpayers will need to reevaluate their record keeping and think of how to minimize their tax liability.

When I look at my own tax return, I cringe. For many years, I wrote off myself (exemption) and business expenses along with mortgage interest, taxes and charities on my Schedule A.

But since I can no long write off business expenses, I do not have enough other expenses to exceed the new standard deductions. So, what can be done?

For older folks with a taxable or traditional IRA or SEP account, particularly those who have reached the age where they are required to take a minimum distribution, consider allocating a portion of the income directly to your favorite charity or charities.

This is done by instructing the trustee to make the donation directly from the account, thus reducing the amount you receive and reducing the taxable income.

For more information on how to do this, contact your tax advisor or the trustee of your retirement account.

If your mortgage is close to being paid off and the amount of interest is minimal, try accelerating payments and pay off your mortgage. It might not pay to keep paying the lender interest for the use of the money.

One of my friends had an adjustable mortgage where the interest rate went from 4 percent to more than 5 percent. The monthly payment remains the same, but the length of the mortgage increased.

She is planning to pay it off since there is no longer a tax benefit to continuing the mortgage.

Look carefully at your health insurance. Review your dependents. Are you eligible to claim a handicapped child or your parents or a significant other or just a dependent friend? If they meet the dependence rules, take them and get a credit on your return.

A senior IRS auditor once told me that she recommends taking the "gray" deductions, because many times it is correct and allowed.

Talk to your tax professional early and do not be afraid of asking questions.

Virginia Moryadas is a tax preparation professional in Bluffton.

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