Now is the time that most adult Americans are filling out forms, mostly online, or have appointments with their tax preparers (who do the filling out of forms) to file taxes for 2018. They are due on April 15th. The tax system for individuals runs a calendar year – January to December.
There is very little you can do about last years income and expenses but there are still a few strategies that can help you for 2018, but they are not available for everyone.
First is to fully fund your Health Savings Account (HSA) if you have one. If you had a High Deductible Health Plan for 2018, you were able to fund an HSA up to $3,450 if single or $6,900 if a family. Most people fund through payroll deductions. If you did not fully fund it, there is still time, until you file your taxes, to fund it to the maximum amount and have that contribution be tax deductible.
The second is to fully fund a Traditional Deductible Individual Retirement Account (IRA). This is funded from earned income. If you have no earned income, but your spouse does, you can use marital income to fund this. The maximum contribution for 2018 is $5,000 with an additional $1,000 catch-up for those 50 and older. But wait, the IRS has income limitations. Depending on your filing status, and your Adjusted Gross Income (AGI), the IRS may deem that you make too much money. Don’t despair, you may still be able to fund a ROTH IRA for 2018 although it is not tax deductible.
Your tax software (or that of your tax preparer) will let you know if you have contributed the maximum to your HSA. It will also tell you how much, if any, you can put into a Traditional IRA or a Roth IRA for 2018.
If you overfunded any of these accounts in 2018, it is easy enough to move the contribution to 2019 or withdrawal the funds. Just let the custodial company where the account is held know the dollar amount it was overfunded. You may have to fill out paperwork but you will not be the first person to do so as this is a frequent occurrence.
By knowing what your taxes for 2018 look like, it can give you a jump on tax strategies for 2019!