Contribute to YOUR Retirement Account to Reduce 2018 Taxable Income
You’ve procrastinated and now it’s April and you haven’t prepared your 2018 tax returns. You haven’t contacted your CPA or tax preparer and made an appointment. Don’t worry! Stop and breathe.
Your options are simple:
- File for a 6-month extension. This would give you until October 15, 2019. The 6-month extension is automatically accepted if IRS Form 4868 is postmarked by April 15, 2019.
- Get moving, very quickly, and take your paperwork to your CPA/tax preparer and pray he/she has the time to complete the return before April 15, 2019.
Here are a few things to consider as an investment toward YOUR retirement and to reduce 2018 taxable income at the same time. Since 2018 has already passed, there’s still a few things that can be done now to reduce last year’s taxable income. If you have the available cash and want to reduce your taxable income, consider contributing the maximum amount allowed as pre-tax retirement savings. You have until April 15, 2019 to make contributions to an IRA, health savings account (HSA) or 401(k) as follows:
IRA – If you qualify for the traditional IRA deduction, the 2018 limit is $5,500, with an additional $1,000 catch-up contribution if you’re 50 or older.
HSA – Contributing to an HSA is an excellent way to save for healthcare expenses in retirement.
401(k) – You can contribute up to $18,500 to a 401(k), 403(b) or federal Thrift Savings Plan in 2018, plus $6,000 in catch-up contributions if you’re 50 or older.
SEP IRA – If you’re self-employed, you could open and fund a SIMPLE IRA, SEP IRA or Solo 401(k).
Definitely consult with your CPA or tax preparer to see which option works best for your situation. Smart tax planning is a year-round process. Most deductions and tax reduction strategies have to be completed before December 31 in order to receive the desired tax benefit for that tax year. Commit to talk to your CPA or tax preparer about your taxes now!