Each year there are changes to the tax code, and this year was no exception. This often leaves many people wondering about the best way to handle their tax situation. There are a few things people can do toward the end of the year to help with their tax planning in the last quarter of 2018.
Retirement Plan Contributions
Individuals should consider putting the maximum amount possible into their retirement account. When someone funds a 401(k) or Traditional IRA, the money they put in is exempt from taxation for the year of the contribution. Should someone put $2,000 into their 401(k), they won't have to pay tax on $2,000 of their income. When people put the maximum in their 401(k) and IRA by the end of the year, they protect that money from being taxed by the IRS.
Charitable Donations
Appreciated stock, as well as cash, can be used as charitable gifts that are often tax-deductible. This can help many individuals reduce the amount of income that is taxable. It is possible to put charitable gifts for many years into a donor-advised fund (DAE) for a single year. It is now possible for someone with charitable donations to deduct up to 60 percent of their annual adjusted gross income.
Income Reporting
When tax planning s, it is important to not make the mistake of not reporting extra income. Should someone fail to report all their earnings, they could face serious consequences. The end of the year is a good time for someone to make certain they have kept a record of all money earned. It is important to realize a copy of every 1099 form is sent to the IRS.
Capital Gains And Stock Losses
The end of the year is a time when individuals should think about selling some of their underperforming investments. This could be essential to generate a significant capital loss prior to the year's end. Doing this could make it possible to offset any capital gains realized from investments that performed well during the year. It may also be possible to deduct capital losses equaling as much as $3,000 from regular income. Carrying over any unused losses to the next year may also be possible. But it’s important to consult a tax professional in Palm Beach Gardens or wherever your location may be to ensure you’re following current tax laws.
Vault Offers Tax Planning and Tax Preperation for Individuals and Businesses
A person can be very diligent with their taxes yet still need tax advice in order to minimize tax liability. To make certain all possible deductions are taken, and to have the best professional advice, contact our tax professionals at Vault. It is easy to schedule an appointment. Simply call (561) 223-3252. Don't let any unanticipated tax issue become an unwanted surprise!