It’s that time of year again.
Taxes are due April 15.
You've started them, right?
Consider taking advantage of some of these tips for lowering your tax burden:
- Maximize your pre-tax retirement plan contributions or start a plan. The maximum this year is $18,500 or $24,500 if over age 50 in 2018. Next year that number is set to rise to $18,500 and &24,500 respectively. If you are self-employed setup and fund maximum contributions to your retirement plan. Which plan you use depends upon your cash flow, the plan rules, whether or not you have employees and other factors such as fees and expenses.
- Contribute to an HSA, MSA or FSA.
- If you have a high deductible healthcare plan you can add a Healthcare Savings Account (HSA) and contribute $3,400 for yourself or $6,750 for your family. Whatever you don’t use can be rolled over and invested.
- Establish a Medical Savings Account (Archer MSA) you can set up an Archer MSA through your employer, a bank, an insurance company, or another financial institution. Medical Savings Accounts are portable, so you can keep the account even if you change employers, and the funds in an MSA remain in the account until you spend them. You do have to check the rules to see if you are eligible for an MSA.
- If you are eligible for a Flex Spending Account (FSA) you should consider that for next year as your amount must be determined at the beginning of the year and the money must be used during the tax year, though $500 is eligible to be rolled forward into the next tax year. An FSA would only be available through your employer and does not require a high deductible healthcare plan.
- Donate your RMD to a qualified charity. While many IRAs are eligible for Qualified Charitable Deductions (QCD).
- You must be 70½ or older to be eligible to make a QCD.
- QCDs are limited to the amount that would otherwise be taxed as ordinary income. This excludes non-deductible contributions.
- The maximum annual amount that can qualify for a QCD is $100,000. This applies to the sum of QCDs made to one or more charities in a calendar year. (If, however, you file taxes jointly, your spouse can also make a QCD from his or her own IRA within the same tax year for up to $100,000.)
- For a QCD to count towards your current year's RMD, the funds must come out of your IRA by your RMD deadline, generally December 31.
- The charity must be a 501(c)(3) organization, eligible to receive tax-deductible contributions.
- The check must be made payable to the charity and not the IRA owner.
- Sell investments that are currently at a loss. You can subtract up to all of your recognized investment losses against your recognized investment gains and an additional $3000 can be written off of your schedule A. If your losses exceed that $3000 limit you can carry forward your loss balance indefinitely against future gains and for an additional $3000 loss in future years until exhausted.
- If you have moved into a life care community consider Roth Conversions of existing IRA or other qualified money. This might be the last year that you can itemize healthcare expenses if Congress reforms the tax code. When you move into a life care community you are paying in advance for a portion of your future healthcare costs. This will allow for a sizable write off of your income. In some cases, this allows for tax-free conversion or very low rate conversion of qualified money from IRA’s and 401k’s. Make sure you use professional advice from your accountant and financial advisor so that you don’ make a mistake.
- Consider old clothing, furniture or other items for donations to a qualified charity. When is the last time you wore that old sweater or sports coat? Perhaps there are some items you have outgrown or a piece of furniture you would like to replace.
Bryan D Beatty, CFP® AIF®
Neither Voya Financial Advisors nor its representatives offer tax or legal advice. Please consult with your tax and legal advisors regarding your individual situation
Investment advisor representative and registered representative of, and securities and investment advisory services offered through Voya Financial Advisors, Inc (member SIPC)