Year-End Tax Planning Strategies for Individuals

With the end of 2018 just around the corner, now is the time to consider some year-end tax planning strategies that could help you lower this year’s tax bill and perhaps next year’s as well.

The Tax Cut and Jobs Act (TCJA) Congress enacted last year created some significant benefits for individual taxpayers such as increasing the standard deduction and lowering tax rates.  But, the TCJA also eliminated personal exemptions and limited some itemized deductions. Despite these changes, there are still many tax savings opportunities available to individuals.  Here are some strategies you might consider implementing before year-end.

  • Consider postponing income until 2019 while accelerating deductions into 2018 to reduce your overall tax liability. Postponing income also benefits taxpayers who expect to be in a lower tax bracket in 2019.
  • It may be be more beneficial to use the increased standard deduction rather than itemizing your deductions. However, taxpayers may still be able to itemize their deductions by paying multiple years’ deductible expenses in the current year.
  • If you are age 70-½ or older by the end of 2018 and have a traditional IRA, consider making a charitable donation via a qualified charitable distributions directly from your IRA. This strategy works well particularly if you can’t itemize your deductions.
  • Using a credit card to pay for deductible expenses before year-end will increase your deductions, even if you don’t pay your credit card bill until the following year.
  • Converting traditional IRA accounts into a Roth IRA can produce future tax savings but may increase current taxable income.
  • Disposing of a passive activity before year-end will allow you to deduct suspended losses from that activity.
  • Making gifts up to the annual gift tax exclusion amount of $15,000 for each donee before year-end may reduce future gift and estate taxes.
  • Remember that you must take your required minimum distribution (RMD) from your IRA by April 1st of the year following the year you reach age 70-½. Failure to take your RMD is subject to a penalty of 50% of your RMD.

Any of these strategies may help you save on income taxes.  We encourage you to contact us at your earliest convenience to discuss those tax saving strategies that make sense for you and your tax situation.