As October draws to a close and the end of the year is rapidly approaching, the next few months are an opportune time to start your year-end tax planning for 2018.
It’s particularly important to start your tax planning early this year because of the significant changes to the tax law that became effective in 2018. These laws may drastically impact the way your taxes look, so giving yourself some extra time for preparation will save you trouble in the long run. This is even more true if you are a business owner, have moved to another state, or plan to make charitable contributions before the year ends.
Before the year is over – in these next few months – you have the best opportunity to use tax strategies for tax-deferred growth opportunities, charitable giving, and tax-advantaged investments. You’ll also want to look into how you can maximize your deductions and tax credits, especially as the rules around many of these have changed with the new tax law. The best way to determine the most advantageous strategy for you and your business is to consult with your attorney or other financial advisors ahead of the busy tax season. They can review your investments to ensure they are meeting your goals and still work well with the new tax law and make any adjustments that are necessary.
What You Need
Many traditional year-end tax planning tips still apply. Make sure to take appropriate losses to offset your gains, contribute the appropriate amount to your IRA and/or Health Savings Account (HSA), and if applicable – that you have taken the necessary required minimum distribution from your IRA. Other items to think about include fully funding employer-sponsored retirement plan contributions such as 401(k), 403(b) or 457 plans before the end of the year. The same applies for college savings plans, such as 529 plans. You may even want to consider converting a traditional IRA to a Roth IRA for additional tax savings.
In addition to these actions, you may want to start gathering the necessary documentation for any deductions you are claiming. This may include copies of statements or receipts for property taxes, medical and dental expenses, child care expenses, education expenses, moving expenses, and heating/cooling expenses. For business owners, the new 199A deduction for your business income will have additional paperwork requirements. Again, we recommend working with your bookkeeper or accountant to organize this information now, rather than waiting until the hectic tax season arrives.
Consult a Professional
With all of the new changes to the U.S. tax code, it is especially important to consider each financial decision you are making in 2018. These decisions are best made alongside a professional tax attorney or financial advisor, who can explain your options under the law while guiding you to the right decisions for you, your family, your business and your future. We’d love to help you prepare – contact us any time to set up a consultation.