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On the other hand, in some extreme cases, there are still a few strategies you can use, and honestly, if it’s on the following list, it’s items you really need to ensure you’re using every year, so if you missed out for 2018, then make sure we draft a plan to use each of these to their fullest in 2019.
Remember use-it-or-lose-it money in flexible spending accounts
Taxpayers don’t pay taxes on money they put in a flexible spending account (FSA), and that tax-free money must be spent on qualified medical expenses before the designated deadline. They can also use this money for unreimbursed medical expenses, like eyeglasses, prescription medications, medical equipment or copays.
Plan to accelerate or delay payments
Because tax reform nearly doubles the standard deduction, fewer people will itemize. But for those who are close to the standard deduction of $12,000 for single filers and $24,000 for married couples filing jointly, bunching their itemized deductions could help them get over the standard deduction every other year. For example, they may wait until January to make some payments or donate to charity. Delaying those expenses until 2019 could boost their ability to itemize for tax year 2019.
Estimate income and determine if a tax benefit phaseout could affect the tax return. If eligible taxpayers are close to a phaseout range of a tax benefit, they could try to lower their adjusted gross income (AGI) so they can claim the tax benefit. This can be done by contributing as much as possible to a pre-tax retirement plan, such as a 401(k), 403(b) or a deductible IRA. 401(k)s and 403(b)s closed out on December 31st, but you’ll have until the filing deadline to make25 contributions to IRAs and some other plans.
Consider a qualified charitable distribution to lower adjusted gross income and taxable income. Taxpayers who are at least 70½ could consider a trustee-to-trustee transfer of some or all of their required minimum distributions to a qualified charity. At the same time, if taxpayers itemize, they lower their taxable income by donating to charity. Of course, they must give to a qualified charity by Dec. 31 and keep the necessary documentation.
Investigate before buying mutual funds
Taxpayers who are planning to invest a large amount in a mutual fund should find out when the fund declares and pays its dividend. As simple as it seems, confirming the fund isn’t declaring and paying a large amount of dividends before the end of the year can save a lot in that year. Buying shares before the dividend is declared could mean you’ll increase your income by the amount of the dividend paid in 2018. This is true even if you reinvest the dividend in new shares.
Wherever you find yourself, make THIS the year that you set aside time early to get your personal tax plans sorted out before the last minute.