There’s still time for U.S. taxpayers to legally minimize their 2018 tax bill. Here are some strategies to implement before December 31st.
At the end of every year, many individuals come to our tax firm seeking ways to legitimately minimize or defer their tax liability. Although tax planning should ideally be done regularly throughout the year, it’s not too late to implement some tax-savings strategies at year-end.
The tax law firm, Moskowitz LLP provides a full range of in-depth, representation to taxpayers seeking to maximize their tax savings. Our dedicated and highly experienced team of tax attorneys and accountants are committed to helping you reduce your tax bill. “There is no reason for you to pay any more than you have to,” says attorney Moskowitz, “meeting with us before year-end could reduce your tax liability considerably.”
Here are some suggestions for you to consider through the end of 2018:
Give to charity
Although the new tax law eliminated many itemized deductions, the charitable giving deduction is still alive and well. You have many options that could benefit others and save you tax dollars at the same time. Here are a few: If your annual donation is less than the new tax law’s increased standard deduction, consider “bunching” your annual donations, itemizing in 2018 and taking the standard deduction next year. You can also donate a piece of art or other collectible and deduct its current fair market value without having to pay tax on the appreciation, and/or use a charitable remainder trust (CRT) to convert a nonproductive asset into a lifetime income stream. If you are 70½ or older, you can also reduce your 2018 taxable income by designating a charity as a beneficiary of your retirement plan.
Bunch other itemized deductions
Bunching isn’t limited to charitable donations. To increase your tax deductions in 2018, you can also apply this strategy to other itemized deductions, including but not limited to medical and dental expenses.
Prepay tax deductible expenses
If you make estimated state and local tax payments, consider paying them in advance. Also look at your other expenses, including claims that may have been made against you, to see if it would be beneficial to pay this year rather than next. Keep in mind that in certain circumstances there are tax and other advantages to pre-paying contested taxes and suing for a refund afterwards. If you pay tax deductible expenses by credit card in December of 2018, you can take the deduction this year even if you pay off your card in January!
Make retirement plan and health savings account contributions
The new tax law did not change the rules regarding retirement plan contributions, so you can still lower your taxable income by making contributions to your 401(k) plan before the end of the year. In addition, taxpayers who contribute to a health savings account (HSA) can deduct $3,450 (individual) and $6,900 (family) in 2018. Add $1,000 to those amounts if you’re 55 or older!
Defer some of your income to next year
You can also reduce your 2018 tax bill by deferring some of your taxable income to next year. For example, you may wish to consider (1) talking to your employer about deferring your year-end bonus to January, (2) deferring any debt cancellation (partial or full forgiveness of a debt you owe), and (3) restricting your annual retirement payment to the required minimum distribution (RMD) amount.
Reconsider your year-end marriage and divorce plans
Keep in mind that for U.S. tax purposes, your marriage status on December 31st is your status for the entire year – in addition to avoiding the marriage tax penalty, there are tax benefits for unmarried people who share a mortgage. The alimony rules will also change in 2019 (no more deductions for alimony payments!), so think about planning your marriage or divorce accordingly.
Meet with your tax professional now!
A qualified tax professional can help you determine which of these last-minute tax savings vehicles applies to you, including making sure that you are properly timing your income, expenses, and capital gains and losses.
The tax lawyers and other financial professionals at Moskowitz, LLP offer comprehensive assistance to businesses large and small, including year-end business tax planning services. Located in the heart of the financial district of San Francisco, Moskowitz LLP works with businesses of all sizes. To learn more about Moskowitz, LLP and how we can help you legally save taxes, visit our website at https://moskowitzllp.com/.
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