6 last-minute tips that will trim your 2018 tax bill

  • Dec. 31 is a key deadline for taxpayers who want to shore up their savings and lower their tax bill for 2018.
  • Whether you’re hoping to make gifts to loved ones, maximize your 401(k) contributions, save for college or donate your required minimum distribution, you should do it now.
Uncle Sam and Taxes
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If you're hoping to trim your tax bill and ramp up your savings for 2018, you have about three weeks to call your accountant and get your act together.

It has been a busy year for taxpayers and accountants, as the end of 2018 signals the first year under the Tax Cuts and Jobs Act.

In all, the tax overhaul roughly doubled the standard deduction to $12,000 for single filers ($24,000 for married-filing-jointly), eliminated personal exemptions and limited itemized deductions.

Despite the changes to the tax law, there are still opportunities to shore up your 2018 finances. Here's what to consider.

Give to charity

Two girls preparing for food drive together
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If you want to lower your tax bill by making donations to charity, you have until Dec. 31 to do so.

Maximize your contribution — and the amount you can deduct if you're able to itemize in 2018 — by stuffing multiple years' worth of donations into one year.

This move is known as "bunching" your charitable contributions.

Sweeten your tax break by donating appreciated stock. This way you can offload highly appreciated shares without incurring taxes on the gains.

"This has the double benefit of a charitable deduction for the full market value of publicly traded stock and a partial rebalancing of your portfolio if you're overweighted in stocks," said Lisa Featherngill, CPA and member of the American Institute of CPAs' personal financial planning executive committee.

Donate your RMD

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If you're 70½ or older, you have until Dec. 31 to take your required minimum distribution from your IRAs and retirement plans.

Failure to do so could mean you're on the hook for a 50 percent penalty on the amount you should have taken.

If you're lucky enough that you won't need the RMD, consider donating the money directly from your retirement account to your qualifying charity of choice. This is known as a qualified charitable distribution.

You don't need to itemize deductions on your tax return in order to do this.

The bonus: Your RMDs are normally taxable distributions, but qualified charitable distributions are not, according to the IRS.

Give to heirs

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You have until Dec. 31 to make gifts to your loved ones for the 2018 tax year. You can give up to $15,000 per recipient to an unlimited number of beneficiaries without paying a gift tax. This is known as the annual gift exclusion.

If you'd like to share even more wealth with your grandkids without being subject to gift taxes, consider paying for their tuition or medical expenses.

All of these payments must be made directly to the provider of these services.

Boost retirement savings

Unlike contributions to an IRA or a health savings account, which can wait until April 15, consider plugging away even more cash into your 401(k).

In 2018, employees can defer up to $18,500 in their 401(k) plan, plus an additional $6,000 for those who are over 50. If you can't handle that outlay, at least save enough to qualify for the employer match.

Here's a bonus: Money that you put into a 401(k) plan isn't included in your taxable income.

Save for college

Mother hugging teenage son as he packs for college
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More than 30 states offer residents a tax break for making a contribution to a 529 college savings plan. You have three weeks to ramp up your contributions if you'd like to nab that benefit on your state tax return.

College savings accounts allow you to save after-tax dollars and have them accumulate tax-free. You can take tax-free withdrawals for qualified higher education expenses.

Be aware that while the IRS will allow you to withdraw up to $10,000 annually for K-12 private school tuition, your state's laws may not permit you to do so.

That means you could be on the hook for penalties and clawbacks of your state tax breaks.

Take your losses

If you reaped large gains from your brokerage account this year, you have until Dec. 31 to harvest the losses in your portfolio to offset the gains.

"It's been a strong year for U.S. equities, but international stocks and fixed income have had negative returns for the most part," said Michael Landsberg, CPA and member of the AICPA personal financial planning executive committee.

No gains this year? You can use up to $3,000 in net losses to offset ordinary income and carry forward the excess into future years.

Be aware that if you sell a security at a loss and buy the same or similar security within 30 days before or after the sale, the IRS won't allow you to claim the loss on your tax return.

This is known as a wash sale.

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