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How to plan ahead for tax season

It may seem too early to start thinking about taxes, but procrastination could cost you. Here are a few simple steps to take by the end of the year that could help you save.

1 Fund a 401(K) Traditional 401(k)s can shield a decent chunk of your income from taxes. In 2018, you can funnel up to $18,500 ($24,500 if you’re 50 or older) into one and avoid paying taxes on that money until you withdraw.

If you don’t have access to a 401(k), you may still be in luck. You may be able to shield up to $5,500 from taxes ($6,500 if you’re 50 or older) by putting the money into a traditional IRA. Bonus: You have until April 15, 2019, to move money into an IRA and still make it count as a 2018 contribution. And yes, it’s possible to contribute to a 401(k) and a traditional IRA in the same year.

2 Donations Itemizing on your taxes generally only pays off when those itemized deductions add up to more than the standard deduction. In 2018, the standard deduction is much higher: $12,000 for single filers and $24,000 for joint filers. That means many charitable donations and other itemized deductions might not get you as much of a tax break as they once did. It’s no reason to stop giving, but consider tinkering with the timing. Donating one big amount in a year, instead of a series of small amounts over several, could make itemizing a better option.

3 Selling losers If you made money on the sale of investments in 2018, you could face capital gains taxes. But you could offset some of those gains with losses.

If you have investment holdings that are sitting at a loss position, it makes sense to liquidate those losses by the end of the year, explains Nicholas Shires, a CPA and tax partner at Dannible & McKee in New York. If your losses exceed your gains, you may be able to deduct the difference on your tax return, up to $3,000 per year ($1,500 for those married filing separately).

4 Stay or go? If you’re still negotiating with a soon-to-be ex and anticipate alimony is possible, keep an eye on the calendar. In general, for divorces finalized after Dec. 31, alimony payers will no longer be able to deduct their payments, and alimony recipients will no longer have to include that money as taxable income. If you're the one that's going to be paying the alimony, you would want it to be finalized prior to December 31, 2018.