It's time again to ponder some year-end tax moves.
Here is a starting list of ideas from Dean Mioli, director of investment planning at SEI Investments in Oaks:
Maximize your retirement-saving contributions. If you turned 50 this year, you're entitled to a catch-up contribution of $6,000 for your 401(k), and there's still time left in 2018.
Review capital gains and losses. The new Tax Cuts and Jobs Act retained the 0 percent, 15 percent, and 20 percent rates on long-term capital gains and dividends for individual taxpayers. However, for 2018–2025, these rates have new brackets, so make sure you check those before filing.
Significant changes to itemized deductions for 2018. For instance, state and local taxes (SALT) deductions are limited to $10,000 for married and single filers. That alone will reduce the number of taxpayers itemizing deductions to under one in three Americans.
Remember to make charitable donations by year end. Donations charged to a credit card before the end of 2018 count for this year, even if you don't pay the card bill until 2019. Also, checks count for 2018 as long as they are mailed in 2018. Also consider gifting appreciated securities instead of cash, which is very tax inefficient, Mioli noted.
Consider a qualified charitable distribution. Retirees in good financial health may wish to consider a qualified charitable distribution, a tax-free transfer (up to $100,000) directly from an IRA to a qualifying charity. You must be age 70½ at the time of the distribution to be eligible and the money must be transferred by Dec. 31.
The benefit of this approach? A direct contribution bypasses the issue of taking the proceeds from a required minimum distribution and reporting it as taxable income, and then using it for contributions. Some brokers or banks might give checks to write from the IRA account directly to the charity. Larger contributions, say over $250 or $500, might be best handled by just using the checks for small contributions.
But taxpayers should be careful not to use these checks for any other purposes. It is best to work with a tax practitioner to make sure that it is done properly, and that the proper acknowledgment letters are received from the charity, said Blue Bell CPA David Zalles.
If you are considering gifting to family or friends. do so by year end. You can give up to $15,000 to anyone without filing a gift tax return. Consider gifting appreciated securities, which removes the gains from your portfolio and possibly reduces the tax bill on the sale if the donor has a lower tax rate than you.
We've come across several handy online tax guides, including one from the Pennsylvania Institute of CPAs (www.picpa.org/consumers/money-life-tips/tax-help), from Citrin Cooperman (www.citrincooperman.com/uploads/1582/doc/2017-2018_Tax_Planning_Guide.pdf), and from Isdaner LLC (www.isdanerllc.com/resources).
And of course, consult the Internal Revenue Service's website page about getting a jump on 2019 taxes (www.irs.gov/individuals/steps-to-take-now-to-get-a-jump-on-next-years-taxes).
If you spot any online resources that you like, send them along and we'll republish them.
And remember, taxpayers who earned less than $66,000 in 2018 may qualify for IRS Free File and can access no-cost tax software online.
The IRS Volunteer Income Tax Assistance and Tax Counseling for the Elderly programs offer taxpayers who earned less than $55,000 in 2018 free face-to-face tax return preparation and free e-file from IRS-trained volunteers. For more information and locations, go to IRS.gov/VITA.
The IRS is always looking for volunteers for these two programs to provide free tax preparation services in 2019.