Whether you have a simple and straightforward IRS Form 1040, own a small business, have rental property, or a combination of all three, it’s not too late to take advantage of certain “last minute” tax saving suggestions that can improve your tax situation for 2018 and beyond. Not all suggestions may apply to your particular situation, but you might have a family member or friend that may benefit from some of these suggestions as well.
Individuals should consider these last-minute, year-end tax saving suggestions:
- Consider increasing the amount you set aside for next year in your employer’s health flexible spending account (FSA), especially if you set aside too little this past year. Qualified deposits into an FSA account are made pre-tax.
- Fund your Health Savings Account (HSA) up to the annual contribution limit ($3,450/single, $6,900/family). Your deductible contribution for 2018 can be made up until April 15, 2019.
- Bump up your retiement savings before year end and into 2019. Consider increasing your deferral percentage in your employer-sponsored retirement plan. The 401(k) plan contribution limit for 2018 is $18,500; in 2019, it is $19,000. Workers 50 and older can contribute an extra $6,000 per year towards their retirement.
- Work around the new reality that many taxpayers who claimed itemized deductions in the past may no longer be able to do so:
- Consider applying a “bunching strategy” to pull or push discretionary medical expenses and charitable contributions into the year where they will be the most advantageous to you from a tax perspective.
- Consider using a credit card to pay deductible expenses before the end of the year. They may be deductible even if you don’t pay your credit card bill until after the end of the year.
- If you are age 70-1/2 or older by the end of 2018, have traditional IRAs and particularly if you cannot itemize your deductions, consider making 2018 charitable donations via qualified charitable distributions from your IRAs.
Last-minute tax saving suggestions for businesses include:
- Make the most of the new Tax Cuts and Jobs Act deduction for qualified business income. Up to 20% of your qualified business income, depending on your taxable income, may qualify as a deduction.
- Consider switching to the cash method of accounting and the deferral of income and/or acceleration of expenses.
- Expense large purchases and take advantage of the $1,000,000 Section 179 expensing limit, subject to taxable income limits.
- Use the expanded bonus depreciation break – 100% bonus first-year depreciation deduction for machinery and equipment, bought used or new, if purchased and placed in service in 2018.
- Take advantage of tax planning in order to reduce next year’s estimated tax payments. If you had a small amount of business income in 2018, your 2019 estimated tax installment payments could be relatively small if planned accordingly.
Give your Tronconi Segarra & Associates tax advisor a call. He/she can talk with you about last-minute tax planning opportunities tailored for your unique situation that may help you reduce your tax obligation.
Author: Lisa Mrkall, CPA, MBA, Senior Tax Manager