Reducing 2018 Taxes

[Broadway2018]

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]

Charitable contributions?

[Mike Scott]

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]

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.

[wow!howmuch?]

HSA??

[curmudgeon]

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

[livesoft]

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.

[engineer1969]

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]

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]

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.

[Duckie]

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]

A backdoor Roth will not reduce your 2018 taxes.

[lakpr]

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]

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....).

[2015]

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]

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.

[Nearly A Moose]

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.

[oslocal]

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.

Should REITs be in taxable now that pass through income is only included at a lower rate?

[Nearly A Moose]

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.

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

[mega317]

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