Smart Year-End Tax Moves
As the end of the year approaches, look into what smart tax moves you can make. For example, donate cash, stocks or other assets to charities, especially if you plan to itemize your deductions. Also:
• Review your investment portfolio’s winners and losers. If you’ve sold some holdings and have substantial capital gains on which you’ll be taxed, you might want to sell some underwater stocks for a loss to offset some or all of those gains. (Don’t buy that stock back until after 30 days pass, though, for the loss to count.)
• Spend any funds in a Flexible Spending Account (FSA) on qualifying expenses, as that’s use-it-or-loseit money. Some employers may give you an extra 2 1/2 months to spend it, and some may let you roll over up to $500 to the following year.
• Contribute to an IRA (and/or your employer-sponsored retirement plan such as a 401(k)) if you haven’t done so yet. The maximum 2018 IRA contribution is $5,500 (plus $1,000 if you’re 50 or older), and it’s $18,500 (plus $6,000) for 401(k)s. The earlier in the year you do so, the longer your contributions will have to grow. (Learn more about these plans at fool.com/retirement.)
• Plan to grab any available tax credits. If your income is low enough and you’re contributing to retirement plans, you may be eligible for the Saver’s Credit, worth up to $1,000 for a single person and $2,000 for couples. If you pay someone to care for your child under age 13 so that you can work, you might be eligible for the Child and Dependent Care Credit. The Child Tax Credit offers $2,000 per qualifying child under the age of 17. The American Opportunity Tax Credit offers savings of up to $2,500 per eligible student for qualified tuition and fees paid by or for the student, while the Lifetime Learning Credit offers up to $2,000. If you’ve recently adopted a child, you may be able to enjoy a credit of up to $13,840. There are many other credits to explore.
For more information, visit irs.gov and usa.gov/taxes.