All You Must Know About Tax Tips and Tricks

Learn these tips and tacks to minimize the taxes you owe the IRS and maximize your tax refund.

You Need to Increase Your Tax Breaks You need to Act Before December 31

You may be having a good year, or recovering from your recent losses, or probably struggling to get on your feet financially; you can be able to save few bucks on your taxes if you take the right steps before the year rounds up.

Five Tax Tips And Tricks That Have Proven To Be very Helpful

1. Defer Your Income

Why pay your tax today when you can still pay tomorrow instead. It is a hard choice for employees to postpone wage and salary income but can be able to defer end of the year bonus into the next financial year, so long as it is a standard practice of the company to pay end of the year bonus the next fiscal year.

Irrespective of you being employed or self-employed you can choose to defer income by taking capital gains in 2019 instead of 2018.

It is only advisable to defer income if you think you will earn a lower tax bracket the following year. You wouldn’t want to be struck by a bigger tax bill in the next year, with additional income that could push you into a higher tax bracket. 

2. You Should Probably Take some last-minute Tax deductions

If you probably want to defer your income into the next year, you may likely want to lower your tax bill by accelerating deductions this year.

Donations to charity is a great way to get a tax deduction. You can as well control the timing.

* if you Owen asset’s for more than a year, you get twice the tax benefits from the donation. You can deduct the assets market value on the date of the gift, so you can avoid paying capital gain tax in the built-up appreciation.

* You can also supercharge your tax benefits of generosity by donating appreciated stock. 

Note: it is essential to keep all receipts no matter how small or big it may be so you can use them to back up any contributions. 

3. Beware of the Alternative Minimum Tax

Accelerating your tax deductions can cost you money. If you accidentally triggered an alternative minimum tax(AMT) or you are already in one. 

The framework for the minimum Tax was designed to make sure wealthy people could not use legal deductions to drive down their tax bill, with more aggressive impact on the middle class.

The rules guiding the AMT is separate from what governs your regular tax liability. You must pay whichever tax is higher. 

Local and state income taxes and property taxes are not deductible under the AMT. So if you intend to be subject to the AMT in 2018, then don’t pay the installments that are due in January 2019 in December 2018.

4. Take note of your flexible spending account

Your flexible spending accounts, also known as flex plans, are fringe benefits which most companies offer that makes employees part of their pay into a special account which can be used to pay for medical bills and pay child care support.

The significant benefit of the money that goes into the account is that it avoids income and social security taxes. You may have to decide at the beginning of the year on how much to contribute to the plan, and if perhaps you didn’t use it all by the end of the year, then you have to forfeit the excess.

Before the years runs to an end, you may want to check to see if your employer has adopted a grace period permitted by the IRS, thereby allowing employees to spend 2018 set aside money as late as March 15, 2019. You might probably take a last minute trip to the drug store, optometrist to use up the funds in your account.

5. Sell loser investments to offset gains.

The end of the year strategy is to recover all your losses. You could sell of investment such as stocks and mutual funds to realize your losses. You can choose to use the losses to offset any taxable gains you have achieved during the year. Losses offset gains penny for penny.

Peradventure your loses is higher than your gains; then you can use up to $3000 in excess to clear out other income.

If you have over $3000, in an excess loss, you can carry it over to the next year. You can choose to use it to offset any 2018 gains, also of other income. 

You can carry over loses year after year for as long as you live, you can seek the advice of a tax preparer if you find this confusing.