6 Ideas For Lowering Your Taxes in 2018
Soon it will be the end of 2018 and 2019 will be here before you know it. If you haven't already done so, now is the time of year to start tax planning. If you have to file a 1040 tax form, your taxes are probably complicated enough to require a tax accountant. I used TurboTax for many years and only recently began to use a tax accountant to help me with my taxes. Although it costs a little money, it's a lot less stressful and my estimated payments are way more accurate now. Whether you have a tax accountant or not, here is a checklist of things that you may want to think about to lower your 2018 taxes:
Expenses to accelerate into 2018 (do this if you expect to make the same or less money next year and you are otherwise eligible to take the deduction this year to lower this year’s tax bill):
Pay your January mortgage payment in December (you'll get to deduct the interest in 2018)
Pay all your property taxes in December (be careful if you are subject to the Alternative Minimum Tax, since this may not help reduce your taxes and you may be better off paying the second half in 2019)
If you are eligible to make an IRA contribution ($5,500 for 2018, increasing to $6,000 in 2019), you have until April 15, 2019 to make your contribution and get the deduction for your 2018 tax return; if you are 50 or older you can make an additional catch-up contribution of $1,000. You can make an IRA contribution regardless of whether you participate in a retirement plan at work, but your ability to deduct the contribution may be limited. You can also convert a traditional IRA into a Roth IRA at any time, even if you can't contribute directly to a Roth because of your income level. This is called a "backdoor conversion." Roth's are great because you don't have to pay taxes on the contributions or earnings when you withdraw the money and the withdrawal rules are more flexible than a traditional IRA.
Sell investments that have lost money and you no longer want to keep by December 31; the limit is $3,000 of (net) capital losses that you can offset against your ordinary income. Losses in excess of this amount are “carried forward” to future tax years, which means you can't use those losses until you have gains to offset or up to $3,000 against ordinary income per year.
Delay income from 2018 to 2019 (similar to expenses, if you expect to make the same or less money next year and you are otherwise able to delay the income):
Delay sale of investments with capital gains that you no longer want to hold until January or later
Defer cash bonus payments until January or later
Have your tax accountant check your estimated taxes paid and withheld to make sure you have paid enough so that you won’t be subject to underpayment penalties when you file your return in April. If you have significant investment or other non-wage income like fees, royalties and other passive income, you will likely need to pay estimated taxes.
If you're looking for more information on tax planning, I recommend Tax-Free Wealth: How to Build Massive Wealth by Permanently Lowering Your Taxes (Rich Dad Advisors) or Lower Your Taxes - BIG TIME! 2017-2018 Edition: Wealth Building, Tax Reduction Secrets from an IRS Insider (Lower Your Taxes Big Time)
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