There’s still time to take advantage of a few tax tips to save money before the end of the year, the first full tax year since the passage of the Tax Cuts and Jobs Act.
A number of rules are different this year, most noticeably the standard deduction, which has essentially doubled to $12,000 for individuals and $24,000 for married couples filing jointly. It’s estimated 90% of U.S. tax filers will take the standard deduction this year.
Determining now if you will itemize can help you judge which tips to take full advantage of.
- Maximize your retirement contributions. This is often free money, even if you don’t itemize. If you can afford to sock a little extra money away in your 401k or IRA, it will lower your tax liability and typically pay big dividends down the road. If you have income from part-time or contractor work, you have until Dec. 31 to set up a new retirement plan, although you can continue to fund it with 2018 dollars into early 2019.
- Maximize your health contributions. You can deposit pre-tax money right now (and until April 15, 2019) to pay for qualifying medical expenses from any time in 2018. You can then immediately withdraw the cash for an instant return of up to 37%.
- Donate to charity. It’s always a good idea to consider giving to nonprofits, but if you may itemize, you’ve got extra incentive right now to give a little more to local charities.
- Sell off your losers. With the recent stock market crash, you may want to sell losing investments to offset up to $3,000 of ordinary income, as well as capital gains you may owe. Speak to a retirement or tax professional for questions.
- Gift to your heirs. If you’re older and well-off, individuals may want to consider gifting up to $15,000 a year to their heirs, free of any tax implications. It will help avoid the eventual estate tax.
- Save for college. A 529 plan is often a good investment choice to sock away money for college with favorable tax liabilities.
- Make an extra payment before Dec. 31. If you have student loan debt or a mortgage payment, you may want to consider making January’s payment before Jan. 1 so you can benefit from the tax benefits of the extra interest payments.
- Squeeze in an extra doctor’s visit. In 2018, you can deduct unreimbursed medical expenses that exceed 7.5% of your AGI; in 2019, that number climbs to 10%. So if you’re close to the threshold, you may want to get the expense on the 2018 calendar.
- Take your required minimum distribution from IRAs and retirement plans. If you’re over 70.5 years old, you may need to make sure you remember to do this.
- No longer deductible! The new tax bill eliminated deductions for things such as expenses related to relocation or moving for a new job, unreimbursed job expenses, and casualty and theft losses, just to name a few.
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