Reducing 2018 Taxes

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Broadway2018
Posts: 178
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Reducing 2018 Taxes

Post by Broadway2018 » Thu Jan 04, 2018 3:23 pm

Anyone have any ideas on how to reduce my 2018 taxes?

I currently make $130,000 a year and max out my 401k and will continue to do so. Other than that, I am not sure where to put my money. People talk about IRA's, however, I think my income is too high. I could put it into a Roth IRA but I don't think that helps taxes. I will not have a mortgage this year so deduction. I have no student loans and wouldn't qualify anyway due to income limit.

Any other things I could do this year for a tax deduction?

JeepDaze
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Re: Reducing 2018 Taxes

Post by JeepDaze » Thu Jan 04, 2018 3:25 pm

Charitable contributions?

Mike Scott
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Re: Reducing 2018 Taxes

Post by Mike Scott » Thu Jan 04, 2018 3:29 pm

There have been several reviews of the major tax code changes published with brackets etc (except perhaps for the more complex corporate changes). Run your numbers through a couple of those and see where you are and where there may be points of tweaking.

livesoft
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Re: Reducing 2018 Taxes

Post by livesoft » Thu Jan 04, 2018 3:31 pm

Buy shares of the Vanguard REIT index fund and when it continues to lose money, sell the shares for a loss. You can get a tax deduction for up to the taxes on $3,000 of the loss.
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wow!howmuch?
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Re: Reducing 2018 Taxes

Post by wow!howmuch? » Thu Jan 04, 2018 3:31 pm

HSA??
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curmudgeon
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Re: Reducing 2018 Taxes

Post by curmudgeon » Thu Jan 04, 2018 3:32 pm

Max an HSA if you have the option with your medical insurance (and if that plan is suitable to you).

livesoft
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Re: Reducing 2018 Taxes

Post by livesoft » Thu Jan 04, 2018 3:33 pm

An income deduction for charitable contributions would require one to itemize on Schedule A. It seems that few people would be able to itemize in 2018 because the standard deduction is bigger than in previous years. But it is still possibility.
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engineer1969
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Re: Reducing 2018 Taxes

Post by engineer1969 » Thu Jan 04, 2018 3:34 pm

Without knowing other details:

Gross 130k
401k (18.5k off Gross)

If you chose a High Deductible Health Plan with HSA you can save another 3.45k tax free

No itemization means your taxable income is 130K - 18.95 - 3.45 - 12 = 95.6 k, solidly in the 24% tax bracket

At this point I think your stuck with backdoor Roth or taxable savings. With the backdoor Roth, you could avoid taxes on future earnings.

H-Town
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Re: Reducing 2018 Taxes

Post by H-Town » Thu Jan 04, 2018 3:36 pm

1. Use HSA/FSA for health care
2. Charitable Contribution: donate shares that have large capital gain, donate used car that you're going to get rid of anyway, and cash donation to the cause you believe in.
3. Save after-tax money as much as you can and let it grow. This might not be directly connected to tax saving strategies, but it might make you feel better after you have to pay Uncle Sam. It's like: "If I have to pay $1 to Uncle Sam, I'll pay myself $1 too!"

Broadway2018
Posts: 178
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Re: Reducing 2018 Taxes

Post by Broadway2018 » Thu Jan 04, 2018 4:44 pm

engineer1969 wrote:
Thu Jan 04, 2018 3:34 pm
Without knowing other details:

Gross 130k
401k (18.5k off Gross)

If you chose a High Deductible Health Plan with HSA you can save another 3.45k tax free

No itemization means your taxable income is 130K - 18.95 - 3.45 - 12 = 95.6 k, solidly in the 24% tax bracket

At this point I think your stuck with backdoor Roth or taxable savings. With the backdoor Roth, you could avoid taxes on future earnings.
THank you for the response! I do not really understand the backdoor Roth. So I opened a roth account at vanguard, however, have not done anything with it yet. Other then my 401k through my employer I have no other account. Could you explain? I have tried to read about it however got even more confused.

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Duckie
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Re: Reducing 2018 Taxes

Post by Duckie » Thu Jan 04, 2018 5:00 pm

kwarden13 wrote:I do not really understand the backdoor Roth. So I opened a roth account at vanguard, however, have not done anything with it yet. Other then my 401k through my employer I have no other account. Could you explain?
If your income is above the limit you can't contribute to a Roth IRA directly. But if you properly use the Backdoor Roth IRA method, you can get the money in there with a little bit of effort and minimal taxes. It's just two steps (contributing to a TIRA and converting to a Roth IRA) plus some extra paperwork.

Since in 2017 you made $130K minus $18K, that's $112K. The 2017 limit is $118K. Unless you have taxable income not mentioned you can contribute to a Roth IRA directly for 2017. When you opened the Roth IRA what year did you contribute for? 2017 or 2018?

A Roth IRA won't reduce your taxes now but it will shelter more income in the future.

livesoft
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Re: Reducing 2018 Taxes

Post by livesoft » Thu Jan 04, 2018 5:04 pm

A backdoor Roth will not reduce your 2018 taxes.
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lakpr
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Re: Reducing 2018 Taxes

Post by lakpr » Thu Jan 04, 2018 5:09 pm

kwarden13 wrote:
Thu Jan 04, 2018 4:44 pm
THank you for the response! I do not really understand the backdoor Roth. So I opened a roth account at vanguard, however, have not done anything with it yet. Other then my 401k through my employer I have no other account. Could you explain? I have tried to read about it however got even more confused.
There's a wiki article on the backdoor Roth, but let me summarize it for you.

1. You should NOT have any traditional IRAs anywhere. Or more precisely, any such accounts should have 0 balances by December 31, 2017.
If you did have balance in any traditional IRA, you are stuck with not being able to contribute to a backdoor Roth IRA for 2017. You can only contribute for the year 2018.

2. If you do have a balance in a traditional or rollover IRA, please ask your HR if your 401-k plan can accept incoming roll overs from traditional IRAs. Some plans do, some don't. If your plan does not accept incoming rollovers, you are stuck. If your 401-k plan does accept, please ask HR again on how to initiate the paperwork for doing so, and complete it. Do this before proceeding to step 2.

3. Call up Vanguard, and open up a new TRADITIONAL IRA. Don't do anything yet about the Roth IRA account you have there. Fund the traditional IRA up to the maximum $5500 (or $6500 if you are 50 or older). Depending on step 1, designate this contribution for year 2017 (no balances in your traditional IRA as of 12-31-2017) or year 2018 (there were balances in your traditional IRA as of 12-31-2017, but you were able to roll them to 401-k).

3. Wait a week. Then call up Vanguard -- or you can do this online as well -- exchange funds from the Traditional IRA into the Roth IRA.

At the time of filing taxes (for 2017 or 2018 as the case may be), your accountant or your tax software will spit out a Form 8606 that you need to file with the IRS.

Nate79
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Location: Delaware

Re: Reducing 2018 Taxes

Post by Nate79 » Thu Jan 04, 2018 5:21 pm

Get married to a spouse that has no income.

Have a kid (going to have to start soon on this if you want the kid to be born in 2018....).

:mrgreen:

2015
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Re: Reducing 2018 Taxes

Post by 2015 » Thu Jan 04, 2018 8:59 pm

My plan is to engage in aggressive TLH should the market tank this year. I've used up my carryover losses, and need more to offset upcoming gains, as well as to use $3K against ordinary income. First world problem I know.

WolfgangPauli
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Re: Reducing 2018 Taxes

Post by WolfgangPauli » Thu Jan 04, 2018 9:05 pm

livesoft wrote:
Thu Jan 04, 2018 3:31 pm
Buy shares of the Vanguard REIT index fund and when it continues to lose money, sell the shares for a loss. You can get a tax deduction for up to the taxes on $3,000 of the loss.
Ha! i assume this is a joke and the suggestion here is your goal should NOT be to reduce taxes... it should be to get the best return, highest income etc. etc. Whatever.. then, once you have that goal set, do it the most efficient way.
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Nearly A Moose
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Re: Reducing 2018 Taxes

Post by Nearly A Moose » Thu Jan 04, 2018 9:56 pm

livesoft wrote:
Thu Jan 04, 2018 3:31 pm
Buy shares of the Vanguard REIT index fund and when it continues to lose money, sell the shares for a loss. You can get a tax deduction for up to the taxes on $3,000 of the loss.
Grrrr..... And mine is thoughtfully held in a Roth, so I can't even harvest the losses. :annoyed
Pardon typos, I'm probably using my fat thumbs on a tiny phone.

oslocal
Posts: 80
Joined: Sat May 21, 2016 5:30 pm

Re: Reducing 2018 Taxes

Post by oslocal » Thu Jan 04, 2018 10:01 pm

Nearly A Moose wrote:
Thu Jan 04, 2018 9:56 pm
livesoft wrote:
Thu Jan 04, 2018 3:31 pm
Buy shares of the Vanguard REIT index fund and when it continues to lose money, sell the shares for a loss. You can get a tax deduction for up to the taxes on $3,000 of the loss.
Grrrr..... And mine is thoughtfully held in a Roth, so I can't even harvest the losses. :annoyed
Should REITs be in taxable now that pass through income is only included at a lower rate?

Nearly A Moose
Posts: 896
Joined: Fri Apr 22, 2016 5:28 pm

Re: Reducing 2018 Taxes

Post by Nearly A Moose » Thu Jan 04, 2018 10:16 pm

oslocal wrote:
Thu Jan 04, 2018 10:01 pm
Nearly A Moose wrote:
Thu Jan 04, 2018 9:56 pm
livesoft wrote:
Thu Jan 04, 2018 3:31 pm
Buy shares of the Vanguard REIT index fund and when it continues to lose money, sell the shares for a loss. You can get a tax deduction for up to the taxes on $3,000 of the loss.
Grrrr..... And mine is thoughtfully held in a Roth, so I can't even harvest the losses. :annoyed
Should REITs be in taxable now that pass through income is only included at a lower rate?
Ha, interestingly posting that comment brought to mind the very same question. I've asked it over here to avoid muddying this conversation more than I already have: viewtopic.php?f=1&t=236890
Pardon typos, I'm probably using my fat thumbs on a tiny phone.

mega317
Posts: 2557
Joined: Tue Apr 19, 2016 10:55 am

Re: Reducing 2018 Taxes

Post by mega317 » Thu Jan 04, 2018 10:56 pm

OP, do you have any other income besides W2? You can eliminate any sources of ordinary dividends such as savings accounts.

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