12 Ways to Save on Taxes by Christmas
December 13, 2018Share:
By: Michael White, CPA
1. Thinking about buying a new vehicle for Christmas?
• Vehicles weighing over 6,000 lbs. used for business can qualify for up to a 100% write off the cost of the vehicle. Many SUV’s, trucks, and crossovers qualify. Discuss the gross vehicle weight rating with the salesperson when shopping or give us a call.
2. Hire your children instead of just giving them money
• Lower your income by shifting some of it to them. They should be in a lower tax bracket and helps them appreciate the value of earning their own money.
3. Maximize your itemized deductions
• With the increased standard deduction and itemized deduction limitations it is more important than ever to bunch them by either postponing payment or accelerating by prepaying
• The postmark or credit card charge date determines when you can take the deduction. Make sure the date is on or before 12-31-2018
4. The old tried and true maxing out tax-deferred retirement contributions
• Take advantage of contributing additional funds to your employer’s retirement plan
• Contribute to a traditional IRA. The maximum is $5,500 plus an additional $1,000 if you are 50 or older
• If your taxes are already low, use a Roth IRA because future retirement distributions you receive can be 100% tax free
5. Have you taken a beating in this turbulent stock market?
• Review your portfolio to maximize the tax benefit of losses and offset gains
• Shift appreciated stocks to your children or other loved ones, so they can take advantage of the 0% tax bracket that you can’t because your income is too high
• Sell loss investments and donating the cash to charity. You may get the double benefit of the capital loss and the subsequent charitable deduction
6. Can you control the timing of your income?
• If you can accelerate or delay the payment of income to you, you may be able to pay an overall lower tax over a two-year period
7. There is a new deduction in the new tax law called Qualified Business Income
• It is available to non-corporate taxpayers including sole proprietorships, income from pass-through entities and unincorporated farmers
• Other tax planning moves can generate an unexpected impact on this deduction, so it is more important now to schedule an appointment with your tax adviser to discuss how you can take full advantage of this new deduction
8. Consider opening a 529 education plan
• Distributions from these plans can now be used for educational expenses at elementary or secondary schools in addition to higher education
9. Hurricane Michael or other disaster hit you hard?
• Although personal casualty and theft losses are suspended until 2026, you may be able to claim a casualty loss provided the casualty you suffered is in a presidentially declared disaster area
10. Home equity indebtedness – interest deduction
• This deduction is suspended through 2025 but proper classification of the loan proceeds may generate a tax deduction (e.g. proceeds to purchase investments or loans to a business)
• If you used the proceeds from your home equity loan to acquire, construct, or substantially improve your home, the interest payments may still be deductible
11. Miscellaneous itemized deductions – suspended through 2025
• Deductions such as unreimbursed employee expenses, job related tools and uniforms, and dues to professional organizations, are not deductible for federal tax but don’t lose track of these items because some states (Alabama) don’t follow the federal rules
• Discuss with your employer a way for you to be reimbursed for your expenses under an accountable plan – Non-taxable to you – deductible for them
12. Can’t itemize but feel charitable – make a charitable contribution of your required minimum distribution (RMD) from your IRA
• Giving part or all the RMD to a charitable organization gives you the tax benefit without itemizing
• You must be 70 ½ years old and there are some qualifications. Consult your IRA plan administrator or give us a call to walk you through the steps
These are just some of the ways Wilkins Miller can help you achieve lowering your taxes. For more tips check out our 2018-19 Tax Planning Guide or give us a call to schedule an appointment to discuss what is best for you.