It’s December, which means it’s time to get into the spirit of giving and celebrate the end of the tax year! We’re accountants, what did you expect? Here are a few free tips that will help save you some money for this tax season. Consider it a holiday bonus from us.
- Make HSA contributions: For those who have a health savings account (HSA), make sure you pay up to your contribution limit of $3,450 for individuals and $6,900 for families so you can add those to your deduction.
- Apply a bunching strategy: Because the standard deduction has been increased and many itemized deductions have been cut, it may be beneficial to bunch your charitable donations and discretionary medical payments into different tax years. For example, if you expect to donate $1,500 to a charity each year, consider instead donating $3,000 this year and skipping next year. This way you’ll be able to exceed that standard deduction and gain the benefits from it.
- Make sure to take care of underpayment tax problems: This one is pretty self-explanatory. Just make sure you have paid enough taxes so you can avoid any penalties.
- Take the required minimum distributions (RMDs): If you are 70 ½ or older, make sure you take out your money from your IRAs or 401(k) plans. If you do not withdraw the minimum amount, you could be penalized 50% of the amount you have not withdrawn.
- Use IRAs for gifts: If you are having trouble figuring out what to use your IRA money for, consider donating it through a qualified charitable contribution (QCD) which directly transfers the money from the IRA trustee to the charitable organization.
- Wrap up a divorce: Before Jan. 1, 2019, alimony payments are deductible by the payor and included in the income of the payee. But after the new year, the payor will not be able to deduct the payments and the payee does not include them in income. So, if possible, finalize the agreement before the new year.
- Make year-end gifts: Gifts up to $15,000 per recipient can be given without paying any gift tax. If you expect to have estate tax liability and can make gifts, consider this option.
We at Stapley Accounting hope that you find these tips helpful during this holiday season!