It is still tax hour. In your haste to do your taxes, do not make these six mistakes.
Josmar Taveras, United States Today
You are not satisfied with your tax situation? Maybe your refund is too small or you owe more to the government than expected.
Fortunately, there are three ways to reduce your federal taxable income and a potential way to reduce your state's taxes.
Some of these strategies are simple to understand, such as contributions to individual retirement accounts. Others are more complex and involve penalties for improper use, such as contributions to health savings accounts.
In these cases, it may be best to seek the advice of a tax specialist to ensure that your contributions are properly paid and that you have a legitimate deduction.
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Here are four things to consider:
Contributions to traditional IRAs are tax deductible. Roth IRA contributions are not deductible. You also have up to the day of the tax return – April 15 of this year – to contribute to an IRA for the previous year.
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For 2018, you can deduct up to $ 5,500 if you meet the income criteria. People aged 50 and over can contribute up to $ 6,500, depending on income.
Generally, you can deduct the full amount of your EI premiums if you and your spouse do not have an employer-sponsored pension plan. If you have a work plan, the amount you can deduct from your contribution may be limited based on your adjusted gross income.
Independent retirement savings
Self-employed and self-employed individuals can use a solo 401 (k) or SEP-IRA to save for retirement. Contributions to these pension plans are tax deductible. You can also make contributions long after the end of the year of civil taxation.
You can contribute to a solo 401 (k) until April 15 to be eligible for a federal tax deduction. The only drawback is that the 401 (k) solo plan must have been opened by the end of 2018; a preparation is therefore necessary.
The 401 (k) solo contributions are a bit complicated. You can make contributions both as an employee and as an employer.
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For 2018, you can contribute up to $ 18,500, or $ 24,500 if you are 50 or older. As an employer, you can contribute to 20% of your income from self-employment, net of the deduction of half the tax paid for self-employment. Total contributions to a solo 401 (k) – as an employee and employer – can not exceed $ 55,000 per year – not including "catch-up contributions" for people aged 50 and over.
If you have a SEP-IRA instead, you also have until April 15 to make contributions – or until October 15 if you file a reporting extension. You can contribute up to 25% of net income from self-employment, or up to $ 55,000 per year.
Health investment savings
If you were covered by a high-deductible health care plan (HDHP) and if you had a health savings account (HSA), you make 2018 contributions to your HSA until you reach the end of the year. to April 15th.
Contribution rules can be complex. In general, the maximum contribution for 2108 is $ 3,450 if you were covered by an HDHP all year. Otherwise, you can make a pro-rated contribution.
Or – if you were covered by an HDHP before December 1, 2018 – you can contribute as much as possible, but you must remain enrolled in an HDHP until the end of the following year. Otherwise, you will have to pay an income tax and a penalty.
Education Savings Plan
Some states allow you to deduct contributions to a 529 plan, a tax-efficient savings plan for future education expenses, on their income tax return. A handful allows you to deduct contributions paid after the 2018 tax year.
You have until April 15 to make 529 contributions that you can deduct on the following state tax returns in 2018: Georgia, Mississippi, Oklahoma, Oregon, South Carolina and Wisconsin. You have until April 30 for the state of Iowa returns.
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