The end of the year is drawing near but you still have the time to reduce on your tax bill. Below are 6 last minute moves that have the potential to save you money.
- Expenses. For income tax purposes, taxpayers are on a cash basis. Meaning, you are taxed on income as it is received and your expenses count when they are paid. So, dependent upon your situation, you can make a big difference in your tax bill by shifting deductions between years. Sometimes making additional payments before the end of the year is a good idea for things such as: charitable donations, property tax payments, and mortgage interest payments.
- Capital losses. You can claim up to $3,000 in capital losses to reduce your income, each year. The limitation of capital losses are calculated after netting all your losses against any capital gains. If you have more losses than gains, it can be used to reduce your other income up to $3,000.
- Fund retirement accounts. Do you own tax deferred accounts such as: 401(k), IRAs, etc.? You can reduce your taxable income by fully funding your retirement accounts that have tax-deferred status.
- Annual gift exclusion. A great way to lower your taxable estate is to take advantage of the gift exclusion. In 2018, you can give gifts up to $15,000 to as many individuals as you would like without tax consequences. Your gifts could include: cash, property, and investments.
- Charity. Think about giving year end donations to an eligible charity. Just remember to get the proper documentation as proof of your contributions to ensure you get the full deductions for your donation. You can donate property that is in good or better condition as well as your charitable mileage. You can decide how much to donate each year by planning ahead. You may decide that saving some donations until 2019 may be a good strategy too.
- Donate stock. You will receive 2 benefits by donating appreciated stock that you have owned 1 year or longer to your favorite charity.
a.) You won’t have to claim capital gains on the appreciation of your investment.
b.) As your contribution amount, you can claim a higher market value of the stock.
The donation of appreciated stock is a fairly strict procedure to follow in order to qualify. To ensure this procedure is done correctly, speak with your CPA or the charitable organization receiving the donation.
This is just a few ideas to reduce your 2018 tax obligations. If you have further questions, contact our office at (866) 497-9761 to schedule an appointment with one of our advisors.