It Isn’t Too Late to Save on 2018 TaxesFebruary 8th, 2019 by Jim Allen
With income tax filing season rapidly approaching, there is still time to consider planning opportunities that may be available to lower your tax bite come April 15th.
One of the most significant planning opportunities that is still available for 2018 is the ability to contribute to an IRA. Even though 2018 has passed, you can make a 2018 contribution to an IRA up until the tax filing date. If you have sufficient earned income, you can contribute up to $5,500 if you are under 50 or $6,500 if you are 50 or older. But, there are qualifications that must be met in order to take a deduction for the contribution. You must either not participate in a retirement plan at work, or if you do, must be below certain income levels.
Self-employed business owners can still make a deductible contribution to a SEP IRA before the tax filing date (subject to percentage of income and dollar amount limitations). Self employed business owners may also be able to take advantage of the new 20% qualified business income deduction for 2018.
Most people are aware of typical itemized deductions like the home mortgage interest deduction. However, there are other lesser known deductions that you may be able to take advantage of. An example would be medical expenses such as health insurance premiums, prescriptions, doctor visits and mileage expense for medical travel. Medical expenses are deductible when they exceed 7.5% of adjusted gross income.
The Tax and Jobs Act did make several changes to your itemized deductions that became effective last year. While now limited to $10,000, state and local taxes (income tax or sales tax, property taxes and car registration fees) are still deductible. Charitable deductions continue to be deductible at up to 60% of adjusted gross income in most cases.
The Tax and Jobs Act also eliminated some deductions that you now won’t be able to take on your 2018 return. For instance, miscellaneous itemized deductions for tax preparation and unreimbursed employee expenses are gone, as is the dependent exemption.
While you are spending time getting your 2018 return in order, let us take a look at your 2019 income tax picture. Planning to minimize taxes is not just an end of year event but an ongoing process. At Anchor Bay Capital, we place a heavy emphasis on tax planning as part of our comprehensive financial planning approach.
If you would like an income tax review, please contact us. It is never too late to start saving on taxes.