Don’t Miss These 10 Last-Minute Tax Savings Opportunities

To find more tax savings from your losing investments, you need to sell them to offset any capital gains you’ve recognized during the year.  Alternatively, you can deduct up to $3,000 in capital losses against your taxable income.

Any excess will carryover indefinitely either to (1) offset future gains you may recognize or (2) $3,000 of future taxable income per year until you’ve exhausted your loss.  Also be mindful of whether you disposed of Section 1231, 1245, 1250 property used in a trade or business.

4. Contribute the Maximum to Available Retirement Accounts

If you’ve read any of my content, you know we learned how to save money in order get the most out of life.  By contributing the maximum to your traditional retirement accounts each year, you can receive some tax savings by reducing your taxable income.

This allows you to build your nest egg for when you eventually reach retirement age.  Whether you contribute to a Traditional 401(k) or Traditional Individual Retirement Account (IRA), you can take a deduction dollar-for-dollar against your taxable income up to $18,500 (401k) and $5,500 (IRA) in 2018.  If you’re 50+, you can contribute an additional $6,000 or $1,000, respectively.

But be prepared to take advantage of 2019’s new retirement plan limits.  Also, if you are self-employed and contribute to SEP IRAs, you can deduct up to 25% of your compensation, or $55,000 for 2018.

You can make eligible contributions for the 2018 tax year through April 15, 2019.

5. Avoid Paying the “Kiddie Tax”

In order to prevent Mom and Dad from shifting their investment income to their children to hide gains, Congress created “kiddie tax” rules.  This makes any income earned by children taxable at a higher tax rate than they otherwise would as a non-dependent.

In 2018, the kiddie tax applies to any investment income received by the child in excess of $2,100.  Investment income can come directly from investments held in the child’s name or the parents’ for the benefit of the child.  Income earned above the threshold is taxed at the same rates as trusts and estates, which are typically higher than those for individuals.

If the child is a full-time student who provides less than half of his or her own support, the tax usually applies until the year the child turns 24.

Be mindful of the tax implications for any gifts given to children to pay for college tuition.  If the gains on the stock are too large and the child has unearned income above $2,100, the earnings could be taxed at the higher rates reserved for estates and trusts.

6. Contribute to Your Health Savings Account (HSA)

It’s not a well-kept secret healthcare costs have risen faster than wages for many years.  To protect their bottom lines, many employers have shifted the burden of paying for healthcare to employees.  This trend has led to higher deductibles and lower coinsurance rates.

Essentially, employees fortunate enough to have health benefits offered through their employers are paying more for less coverage.  Even worse, it doesn’t appear as though this trend will abate anytime soon.

Some high deductible health plans, or those with a higher incentive to forego healthcare because the insured pays full freight until reaching the policy deductible, come equipped with access to a health savings account (HSA).  These accounts offer a tax-advantaged method of saving for healthcare-related costs.

In effect, participants save pre-tax dollars and allow them to grow tax-deferred until needed for medical treatment.  At withdrawal, qualified healthcare expenses can be paid with funds set aside in an HSA.

Individuals can contribute up to $3,450 and families can contribute $6,900 post-tax and deduct them against your taxable income at tax filing time.

7. Use Any Remaining Funds in Your Flexible Spending Accounts (FSAs)

Flexible Spending Accounts are another source of tax-advantaged funds you can use toward qualifying medical expenses.  The difference between FSAs and HSAs are the funds kept in an HSA rollover indefinitely, whereas funds left in the FSA qualify for the infamous “use it or lose it” rule.

Many employers offer these FSAs as a way to help employees pay for medical expenses which crop up during the year.  Employees set aside money into these special accounts throughout the year but have access to the funds from the first day of the year.

In other words, if you choose to set aside $1,000 in your FSA for 2018, you can use the entire balance from January 1, 2018 but make equal payments toward the account throughout the year.  However, any unused amount is forfeit at the end of the year.

Like HSAs, the money avoids both income and Social Security taxes.  That makes these funds a great way to fund medical expenses throughout the year if you can target the correct amount to set aside.

With year-end approaching, check to see if your employer has adopted a grace period permitted by the IRS, which allows you to spend unspent 2018 FSA funds as late as March 15, 2019.

If not, you can always make some last-minute trips to the drug store, dentist, or optometrist and use up any funds left in the account.  Don’t lose your hard-earned money!

8. Donate to Charity

The holiday season is upon us and with it comes your ability to contribute to the qualified charity of your choice.  This is a great time to pull your spring cleaning ahead and empty out those closets of any no-longer needed linens, clothing, shoes, household goods and anything else you can think of to donate.

There are a number of qualified charitable organizations who would love to take these items off your hands.  In exchange for some newfound room in your home, you also find some tax savings and get a deduction to count against your taxable income.

You can also count monetary donations made to a qualified charitable organization.  And any volunteering you do for an organization can have mileage driven to and from the activity qualify for a $0.14 per mile deduction.  It might not be much, but it is something to keep in your back pocket come tax time.

TurboTax will provide a calculator to value and track your donated goods and mileage driven for volunteering.  It’s got quite a handy set of tools to help you tackle your annual tax return.

9. Take a Class to Improve Your Career

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