Strategize now to position yourself for savings.
Spring is the ideal time for tax planning. Consider these ideas for lowering your 2018 federal tax bill. How much can you direct into retirement accounts? Contributions to various employer-sponsored retirement plans are deductible dollar-for-dollar. The same applies to traditional IRA contributions; though, this tax break is reduced if your income exceeds a certain level.1 Both employer-sponsored plans and traditional IRA’s have contribution limits and other provisions that may vary. Check with your employer and financial professional for the specifics of your accounts.
Can you contribute to an FSA or HSA? Flexible Spending Accounts have a $2,600 limit for 2018. Health Savings Accounts have a $3,400 limit for individuals this year and a $6,750 limit for families. Your direct contributions to HSAs are tax-deductible. FSA contributions are not tax-deductible, but they do reduce your taxable wages.2
Can you harvest investment losses? An individual can deduct up to $3,000 in portfolio losses per year. Investments must be sold to get this tax break.3
Could you shift some income into 2019? If you work solo and must pay income tax, plus 15.3% self-employment tax, on net business income, perhaps you could collect some revenue next year rather than this year. If you aren’t self-employed but might get a large year-end bonus, the same tactic could help.
How could you donate to charity? Both cash and non-cash contributions to a qualified charity are deductible under I.R.S. rules; you do need to itemize them.3
Now is the ideal time to meet with your financial team. What potential savings could your business, practice, or household plan to realize?