If you are like many people, you are procrastinating the filing of your 2018 individual income tax returns. Don’t worry, you still have time to reduce your 2018 income tax burden. Below are five ideas to reduce your taxes for last year:
- Contribute to an Individual Retirement Account (IRA). If you qualify, you may contribute $5,500 (or $6,500 if age 50 or older) to an IRA prior to April 15, 2019, and claim the deduction on your 2018 individual income tax return. This is a wonderful deduction in which you gain a benefit and continue to control your money.
- Contribute to a Health Savings Account (HSA). Many families have increased the amount of their health insurance deductible to offset the increase in policy premiums in recent years. If your policy qualifies as a “High-Deductible Plan”, you may open and contribute up to $3,450 for a single person, or $6,900 for family coverage, to a Health Savings Account. Similar to an IRA, this is an effective method of lowering your tax burden while you continue to control your funds. Remember, these accounts can only be used to pay for qualified medical expenditures. Your contribution must be performed prior to April 15, 2019.
- Establish and fund a Simplified Employee Pension (SEP) Plan. One of the most generous tax deductions, a SEP Plan is similar to a 401(k) plan in that it allows larger contributions annually than an IRA. This type of plan is available to individuals, corporations
andpartnerships with self-employment income. If you qualify, you may contribute a maximum of $55,000 to an SEPPlan prior to the filing of your income tax return and take the deduction in 2018. This is a unique opportunity for those individuals who can’t file their returns by April 15, 2019. You may contribute to this plan up to the extended due date for filing your return. Although a littlemore complicated than an IRA, the larger contribution limit allows significant tax savings and, more importantly, greater opportunity to grow your retirement savings.
- Contribute to the Oklahoma 529 Colleges Savings Plan. If you wish to benefit your children, and yourself, consider contributing to their college needs before April 15, 2019. You may contribute up to $10,000 per year filing as an individual or $20,000 per filing as a married couple. Based on Oklahoma’s current tax rate, this contribution may save you $500 to $1,000 of Oklahoma income tax for 2018. Another positive attribute about these plans is the right to transfer the funds among family members and utilize the growth of the account without taxation as long as the funds are spent on qualified educational expenses.
- Immediate Expensing of Qualified Business Assets. For many self-employed individuals, this section of the Internal Revenue Code is utilized to control their income tax liability in a significant way. For example, if you are self-employed and bought tangible personal property (an IRS term that simply means, “not land or buildings”), you may be availed a tremendous deduction against your income. The limit for this deduction for 2018 is $1,000,000. For most small businesses, this is an opportunity to invest in your business and take a tax deduction for doing so. Certain types of property must be purchased and limitations apply.
Don’t take chances with your income taxes. Consult a CPA or Certified Financial Planner practitioner to determine if you qualify for the above deductions. Remember, every dollar you save in taxes can be used by your family for something of your choice.