Individual Tax To-Do List
The end of the year is approaching, and that means you should begin preparing to file your taxes in Vero Beach. The following to-do list includes seven important financial items to address before 2019 arrives.
1. Max out your tax-advantaged savings
Reduce your taxable 2018 income by contributing to a traditional IRA, a health savings account (HSA), or an employer-sponsored retirement plan.
2. Use your expiring Flexible Spending Account (FSA) funds
If you have an FSA for health care expenses, you need to use your funds on qualified expenses by December 31, 2018, or risk losing them, depending on your plan. Some FSA plans do allow you to carry over a certain amount of money to the following year, so be sure to check.
3. Take your required minimum distributions (RMDs)
Once you reach the age of 70½, you are required to take RMDs from your IRA or your employer-sponsored retirement plan by the end of 2018 in order to avoid a 50 percent penalty. If you turned 70½ this year, you have until April 1, 2019, to take your first RMD. Remember that if you defer your first distribution, you'll have to take two the following year.
4. Make the most of your annual limits
If you have any annual limits that won't carry over, make the most of them even if you can't deduct them from your income tax. For example, if you're concerned about gift and estate taxes, make your annual exclusion gifts of up to $15,000 per recipient.
5. Put money towards a Sec. 529
College savings plans and Sec. 529 prepaid tuition plans aren't subject to annual federal contribution limits. While you can't get a federal income tax deduction by contributing to such a plan, you might be entitled to a state income tax deduction, depending on your state and your plan.
6. Think about doing a qualified charitable distribution (QCD)
If you're 70½ or older, you can transfer upward of $100,000 tax-free directly from your IRA to a qualified charity and apply the amount to your RMD. This can be particularly helpful if you otherwise wouldn't qualify for a charitable deduction.
7. Make sure to review withholding
If you could face underpayment penalties, you should increase withholdings from your wages for the remainder of the year.
Be sure to go over this to-do list before the year ends as you prepare for your tax filing in Vero Beach. For professional advice concerning your upcoming tax returns, be sure to contact us at KEGA CPAs in Vero Beach today.