2018 End of the Year Tax Planning Tips

by | Dec 24, 2018 | Tax Planning

Some Tax Suggestions for the End of 2018

The Tax Cuts and Jobs Act of 2017 should have taxpayers thinking about things they can do – even in late December of 2018 – to help save on their federal taxes. While it’s great to focus on the holidays, focusing on taxes can help free up some money for 2019 and beyond. Here are a few strategies to consider:

First, the best strategy is to speak with experienced attorneys who understand how taxes can affect:

  • The operation of a business
  • Probate and trust considerations
  • Charitable giving
  • Other tax issues

Capital gains and losses

Capital gains and losses apply to stocks, bonds, and other assets such as real property. The old law allows the gains to be deferred on “like-kind exchanges” of many different types of property. The new law only allows the deferment for like-kind exchanges of real property.

Taxpayers should consider whether they have losses which can be used to offset against any gains. In general, only $3,000 in losses can be offset against gains.

Home energy-saving improvements

If work on your home to save energy is completed in 2018, you may be able to use a tax credit on your return. Examples include installing or upgrading to use solar power, wind energy, and other green energy source.

Changes in the standard deduction

Taxpayers need to understand that the new law encourages taking standard deductions over using itemized deductions. The standard deduction for couples was raised from $12,700 to $24,000 for couples who are married. The standard deduction increased from 6,350 to $12,000 for individual tax filers.

The ability to itemize deductions has been altered

It used to be that tax filers could deduct (if they itemized deductions instead of using the standard deduction) up to 7.5 % of their adjusted gross income. That percentage applies for 2018 but increases in 2019 to 10%. So, it may be better to pay medical bills in 2018 than to defer payment. If possible, December 2018 procedures may still be better tax-wise than January 2019 procedures.

State income taxes are also deductible in 2018 up to $10,000 and provided you don’t use the alternative minimum tax.  Try to pay state property taxes in 2018 instead of paying in early January – provided the prepayment is on property taxes that have already been assessed.

When it comes to charitable contributions, the new tax law favors payments by cryptocurrency over cash – provided other conditions are met.

Know that other many other miscellaneous deductions are now not allowed. Check with an experienced Arizona business lawyer to learn which deductions can still be itemized.

If you have a mortgage, make the extra payment in December instead of January.

Adjustments to your income

The new tax law keeps intact many ways to reduce your adjusted gross income. This includes:

  • Putting money into an IRA
  • Placing funds in a health saving account
  • Moving expenses for individual taxpayers
  • Various approved business. For example, it can help to pay worker’s compensation insurance or other business insurances in 2018 instead of 2019

It may make sense to defer some income depending on how much you will earn in 2018 and expect to earn in 2019 and your corresponding tax brackets.

Gift and estate tax planning

The new tax law changes the federal estate tax exemption from around $11 million for a married couple to about $22 million – but only for people who die between 2018 and 2025. The exemption amount falls back to the $11 million base (or $5.5M for an individual) in 2026.

If a family is potentially facing estate tax exposure, now may be a good time to gift assets to children and other family members.

Contact an experienced Arizona business and estate planning attorney to learn more about late December tax saving strategies

At Yaser Ali Law our Tempe Arizona lawyers advise individuals, families, and businesses. We strategize to minimize your tax obligations and maximize your investments. We help plan your estate and draft documents to protect your assets and help your loved ones get the shares you direct. Our firm consults with tax professionals when necessary. For help now, please call us at (480)-442-4175 or fill out our contact form to make an appointment.