Even if you have already earned the majority of your income for 2018, there are still some last-minute ways you can reduce the amount of taxes you owe in the current tax year. Below, our tax attorneys in Oakland have written out some helpful tips you can implement to achieve this goal:
Make an IRA Contribution
Contributions to a conventional IRA are tax-deductible during the year they are made. While various Internal Revenue Service rules on IRA contributions apply differently, depending on the situation, you can typically deduct the entire amount of such contributions if you are not covered by employer-sponsored retirement plans.
If you have lost money on a capital investment, such as a stock, you can reduce your taxes with that loss. However, you must first sell the stock at a loss so that the loss is “realized.” When you have done so, it can be used to offset any of your realized capital gains.
Bundling business expenses as much as possible into the current year is a great way to reduce this year’s income taxes. For example, if you have a significant capital expense coming up, you may wish to consider making it at the end of 2018, instead of the beginning of 2019. For instance, if you usually spend approximately $4000 per month to purchase supplies for your business, you may wish to purchase $12,000 worth in December 2018, as this will get you through the next 90 days and you can receive a deduction on the current tax year for that expenditure.
For income tax purposes, individual taxpayers are on a cash basis. This essentially means that your income is subject to taxes when you receive it, and expenses do not count until they are paid. Therefore, depending on your individual situation, shifting deductions from one year to the next can make a tremendous difference on how much taxes you owe. For example, you can make additional deductible payments before the end of the year on many things, from charitable donations to mortgage interest payments and property tax payments.
Fund Tax- Deferred Retirement Accounts
A simple avenue through which your taxable income can be reduced is to fully fund tax-deferred retirement accounts. The most common of these are 403(b), 401(k), and other IRAs, such as traditional SIMPLE and SEP accounts.
Donate Appreciated Stock
There are two benefits associated with donating appreciated stock you have owned for 12 months or more to a charity: you can claim the stocks higher market value as the amount of your contribution, and it will no longer be necessary to claim the capital gains on your stocks appreciation.
Please contact our tax attorneys in Oakland if you need further information about last minute ways to lower your taxes for 2018.
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