Come February, there isn’t much you can do to save on your taxes — most tax breaks required taking action by Dec. 31 of last year. But tax pros say there are a still a few maneuvers you can make to lower your tax bill before the April filing deadline.
1. Contribute to an IRA
This is one of the most popular last-minute ways to cut tax bills, says Meredith Tucker, a certified public accountant and principal of entrepreneurial services at Kaufman Rossin in Ft. Lauderdale, Florida. You have until April 15 to put up to $5,500 into a traditional IRA ($6,500 if you’re 50 or older) and earmark that contribution for 2018, even though you made it in 2019.
That could be huge because contributions to traditional IRAs can be tax-deductible, lowering your tax bill. How much you can deduct depends on your modified adjusted gross income, your filing status and whether you or your spouse are covered by a retirement plan at work.
The investments inside a traditional IRA grow tax-deferred, which is another advantage. “Even if it’s going to be not deductible, I think it’s a conversation worth having with your tax professional,” Tucker says.
2. Pump up your health savings account
If you have a high-deductible health insurance plan that makes you eligible for a health savings account, you can make tax-deductible contributions for 2018 until April 15, says Shomari Hearn, a certified financial planner, enrolled agent and managing vice president at Palisades Financial Group in Ft. Lauderdale.
The max contribution is $3,450 for people with self-only coverage and $6,900 for people with family coverage. If you were 55 or older at the end of 2018, you get to add an extra $1,000 to those limits.
3. If you’re self-employed, save for retirement
You may be able to cut your 2018 tax bill by socking away some of those freelance earnings in a solo 401(k), which is a retirement plan for business owners with no employees. For 2018, the contribution limit is $55,000, but see IRS Publication 560 for the rules.
The account had to be open by Dec. 31 of last year, Hearn warns, but you have more time to put money into it. “The great thing about it is that you can make the contributions up until basically you file your final return for the year,” he says.
4. Get organized
Categorizing your 2018 expenses and looking at year-end summaries from your bank, credit card providers and other sources are worth their weight in gold because they can reveal months-old potential deductions you may have forgotten about, Tucker says.
“The little things add up, and if you can come up with some sort of mechanism to try and capture that, that translates into real savings,” she says.
If you’re working with a tax preparer, you can also save money by giving that person an organized and complete set of records as soon as possible.
“If you procrastinate and you wait to provide them with that information a couple days before the tax deadline, it creates a lot more pressure and burden and time constraints on the accountant,” Hearn warns. “You can often see that your bill may be higher to prepare your tax return as a result — especially if you’re habitually late in providing your information at the last minute.”
Being on the ball can also get you more bang for your tax-prep buck, Tucker adds.
“If you are so harried that you come to the meeting stressed and you don’t know which way is up, I think it takes away from more productive, forward-looking tax planning — and that can cost you some money,” she says.