Reducing 2018 Taxes
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Reducing 2018 Taxes
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?
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?
Re: Reducing 2018 Taxes
Charitable contributions?
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Re: Reducing 2018 Taxes
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.
Re: Reducing 2018 Taxes
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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Re: Reducing 2018 Taxes
HSA??
"Gold is warm and contains something of the sun". --Saint Hildegard of Bingen (1098-1179)
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Re: Reducing 2018 Taxes
Max an HSA if you have the option with your medical insurance (and if that plan is suitable to you).
Re: Reducing 2018 Taxes
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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Re: Reducing 2018 Taxes
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.
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.
Re: Reducing 2018 Taxes
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!"
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!"
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Re: Reducing 2018 Taxes
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.engineer1969 wrote: ↑Thu Jan 04, 2018 3:34 pmWithout 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.
Re: Reducing 2018 Taxes
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.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?
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.
Re: Reducing 2018 Taxes
A backdoor Roth will not reduce your 2018 taxes.
Re: Reducing 2018 Taxes
There's a wiki article on the backdoor Roth, but let me summarize it for you.kwarden13 wrote: ↑Thu Jan 04, 2018 4:44 pmTHank 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.
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.
Re: Reducing 2018 Taxes
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....).

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

Re: Reducing 2018 Taxes
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.
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Re: Reducing 2018 Taxes
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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Re: Reducing 2018 Taxes
Grrrr..... And mine is thoughtfully held in a Roth, so I can't even harvest the losses.

Pardon typos, I'm probably using my fat thumbs on a tiny phone.
Re: Reducing 2018 Taxes
Should REITs be in taxable now that pass through income is only included at a lower rate?Nearly A Moose wrote: ↑Thu Jan 04, 2018 9:56 pmGrrrr..... And mine is thoughtfully held in a Roth, so I can't even harvest the losses.![]()
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Re: Reducing 2018 Taxes
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=236890oslocal wrote: ↑Thu Jan 04, 2018 10:01 pmShould REITs be in taxable now that pass through income is only included at a lower rate?Nearly A Moose wrote: ↑Thu Jan 04, 2018 9:56 pmGrrrr..... And mine is thoughtfully held in a Roth, so I can't even harvest the losses.![]()
Pardon typos, I'm probably using my fat thumbs on a tiny phone.
Re: Reducing 2018 Taxes
OP, do you have any other income besides W2? You can eliminate any sources of ordinary dividends such as savings accounts.