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CONTRIBUTE TO A HEALTH SAVINGS ACCOUNT
If you participate in a certain type of health plan, you may be eligible to contribute the following amounts into a health savings account (HSA) in 2018:
Up to $3,450 if you have self-only coverage ($4,450 if age 55 or over)
$6,900 if you have family coverage ($7,900 if age 55 or over)
This contribution can be made up until the due date for your return, so you can decide to make a contribution for 2018 as late as April 16, 2019.
If you have not reached this contribution limit for the year, it may be a good idea to contribute. Contributions are deductible even if you do not itemize your deductions. In addition, HSA funds can remain in the account and do not expire at the end of the year. So, placing money into the HSA may enable you to cover potential out-of-pocket expenses in the future. If an HSA distribution is used to pay medical expenses, the distribution is not taxed.
BUNDLE MEDICAL EXPENSES
Medical expenses are deductible for certain people. However, this deduction is limited; it only applies when both of the following are true:
You decide to itemize your deductions (instead of taking the standard deduction), and
Total qualified medical expenses paid exceed 7.5% of your adjusted gross income for 2017 or 2018
For many, these restrictions will prevent any qualified medical expenses paid out-of-pocket during the year from being deducted on their return.
If you do qualify for this deduction, it’s ideal to bunch medical payments into a single year. Since the deduction applies when the expense was paid, if your medical provider allows it, you can arrange to pay medical expenses from prior years or future years in the current year. This allows you to increase your total medical expenses for the year.
MAKE CHARITABLE CONTRIBUTIONS
This is another sometimes-overlooked deduction. Charitable contributions can both decrease your tax liability and allow you to give back to your favorite cause. Contributions can be made in cash or property to any qualified charitable organization, although special rules and restrictions may apply for non-cash contributions.
As with medical expenses, this deduction is only available for those who itemize. There is generally no restriction on the amount you may give to a qualified charity. However, if your income exceeds certain levels, the amount you can deduct may be phased out or eliminated. Contributions are deductible in the year they are made. So, by giving more to a qualified charitable organization before the end of the year, you could increase your tax deduction.
MAXIMIZE YOUR RETIREMENT PLANS CONTRIBUTIONS
Retirement savings can also help reduce your tax bill. For individual taxpayers, the best way to accomplish immediate tax savings is by setting up a traditional individual retirement account (IRA).
Depending on your income, filing status, and retirement plan coverage through work, you may be able to deduct up to $5,500 in 2018 ($6,500 if age 50 or over). Like with HSAs, you do not need to itemize to deduct IRA contributions. Another bonus is that contributions can be made until the tax due date of the following year (April 16, 2019, in this case).
There are also less common ways a retirement plan can be a good last-minute tool to lower your tax. Making contributions to an IRA or employer-sponsored plan (like a 401(k) plan) may allow you to claim a credit for retirement savings. For small-business owners, setting up a retirement plan in connection with that business can reduce your net self-employment income and, by extension, your self-employment taxes. Assets held within these retirement plans will also grow tax-deferred over time.
MAKE EDUCATION SAVINGS PLAN CONTRIBUTIONS FOR STATE-LEVEL DEDUCTIONS
Contributing to an education plan like qualified tuition programs (QTPs, or 529 plans) and Coverdell Education Savings Accounts (ESAs) will not qualify you for a deduction on your federal return. However, many states will allow a deduction on the tax return for these contributions. Furthermore, in many cases there are no limits placed on how many such accounts may be set up.
PREPAY YOUR MORTGAGE OR PROPERTY TAX
Another pair of common itemized deductions, especially for homeowners, is for mortgage interest and real property tax payments. Often, it is possible to arrange your billing for these expenses so that interest and tax payments for the following year can be assessed before the end of the current year. For example, you may be able to pay assessed mortgage interest for January 2019 prior to December 2018, which would allow you to deduct the mortgage interest paid on your 2018 return.
By taking advantage of one – or more – of these tax strategies before the end of the year, you put yourself in a great position for tax time. If you need any additional help, you can always consult with one of our tax professionals, too.
GET TAX RELIEF HELP TODAY
If you think that you may need help filing your 2018 tax return and past due tax returns, you may want to partner with a reputable tax relief company who can help you get the max refund and reduce your chances for an IRS AUDIT.
Advance Tax Relief is headquartered in Houston, TX with a branch office in Los Angeles, CA. We help many individuals just like you solve a wide variety of IRS and State tax issues, including penalty waivers, wage garnishments, bank levy, tax audit representation, back tax return preparation, small business form 941 tax issues, the IRS Fresh Start Initiative, Offer In Compromise and much more. Our Top Tax Attorneys, Accountants and Tax Experts are standing by ready to help you resolve or settle your IRS back tax problems.
Advance Tax Relief is rated one of the best tax relief companies nationwide.
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