Just a reminder that the last day you can make a tax-deductible purchase, pay a tax-deductible expense, or make tax-deductible charitable contributions for 2018 is Dec. 31. Every taxpayer’s situation is unique, and the suggestions offered here may or may not apply to you. The best way to ensure that you are putting yourself into the most tax-advantaged position is to consult with one of our Boca Raton tax advisors usually earlier in the year. However, the following are some tax strategies that can be utilized at the last minute.
Accelerate Charitable Deductions
If you regularly contribute to your church, synagogue, or temple you might consider pre-paying part or all of your planned 2019 contributions, thus advancing the deduction into 2018. This can be especially helpful to individuals who marginally itemize their deductions, possibly allowing them to itemize this year and then take the standard deduction for 2019.
Maximize Tax-Deductible Medical Expenses
For example, if you have outstanding medical or dental bills, paying the balance before year-end may be beneficial, but only if you already meet the 7.5% of the AGI floor for deducting medical expenses, or if adding the payments would put you over the 7.5% threshold and you are itemizing your deductions. You might also wish to consider scheduling and paying for medical expenses such as glasses and dental work before the end of 2018, since the medical floor is slated to increase to 10% of the AGI in 2019.
Take Steps to Avoid Underpayment Penalties
If you are going to owe taxes for 2018, you can take steps before year-end to avoid or minimize the underpayment penalty. The penalty is applied quarterly, so making a fourth-quarter estimated payment only reduces the fourth-quarter penalty. However, withholding is treated as paid ratably throughout the year, so increasing withholding at the end of the year can reduce the penalties for the earlier quarters.
Sell Losing Stocks
If you have stocks that have declined in value, you still have time to sell them before the end of the year and use any losses to offset other gains for the year or produce a deductible loss. The net capital loss deductible on a tax return is limited to $3,000 for the year, but any excess loss carries over to future years.
Make Business Purchases
You can make last-minute business purchases such as for office equipment, tools, machinery, and vehicles and write them off using the 100% bonus depreciation or Sec. 179 expensing, provided you actually place the item(s) into business service by the end of the year.
Consult With the Boca Raton Tax Advisors at East Coast Tax Consulting Group
If you would like to discuss these tax strategies or other tax matters including IRS back tax problems, we encourage you to contact our Boca Raton tax advisors at 561-826-9303 for further information.