Most of the last-minute opportunities to reduce your tax liabilities for 2018 have come and gone.
You can't deduct charitable contributions you make in 2019 from last year's income, nor can you deduct expenses against last year's income for medical procedures you get now. You can't give 2018 tax-free gifts to your heirs today or harvest losses on investments tomorrow to offset gains realized last year.
The bulk of the things you could do reduce your tax bill for last year expired on Dec. 31. But not all of them. There are still a number of steps taxpayers can take to help reduce the bite on April 15. Some have been available to taxpayers for years, while others are a result of the Tax Cuts and Jobs Act passed last year.
Here are five things to consider before filing your return this year.
1. Individual retirement account contributions.
Taxpayers can still make tax-deductible contributions to an IRA. Unlike 401(k) contributions that have to be made before year-end, taxpayers have until April 15 to contribute to their IRAs and still deduct them from 2018 income.
"It's one easy thing you can still do now to reduce your taxable income for last year," said Amy Wang, a senior manager of tax policy and advocacy for the American Institute of CPAs.
If you don't participate in a workplace retirement plan, you can deduct up to $5,500 in IRA contributions and can add in another $1,000 "catch-up" contribution if you're over age 50. If you are in a 401(k) plan at work, you can still deduct IRA contributions to the full $5,500 limit if you're adjusted gross income is less than $63,000. The deduction phases out for taxpayers with income between $63,000 and $73,000 and disappears over that income level.
2. Getting "in the zones."
One of the key job-creating incentives in the Tax Cuts and Jobs Act is the creation of more than 8,700 low-income "opportunity zones" across the country. Individuals or companies that invest in these zones through qualified funds can defer or avoid taxes on capital gains they've made elsewhere.
For example, if you sell a $100,000 portfolio of stocks that has produced $50,000 in capital gains, you would owe as much as $10,000 in taxes on the gain depending on your level of income. However, if investors roll the gain into a qualified opportunity fund, they can defer the taxes due until 2026 or until they sell the new investment.
They can also reduce the taxable gain if they hold the investment for at least five years. The longer the holding period, the greater the reduction of the gain subject to tax.