5 Important Things to Know for Your 2018 Taxes

March 5, 2019

With tax time finally here, you’re probably starting to load everything into your tax preparation software or send documents to your CPA.  Below are a few items that may be tougher to keep track of during the year but are certainly important pieces of information to pass along to your tax preparer.

  • 529 Contributions/Distributions – Other than your year-end statement, you may not receive something specific to send to your accountant that outlines the amount you put into 529 plans during 2018.  Make sure to track this information down and pass it along to your accountant to confirm you receive the appropriate deduction on your state income tax return.  Also, if your return were to ever be audited, be sure that you can sufficiently prove that all distributions taken from 529 plans during the year were used for qualified education expenses.
  • Qualified Charitable Distributions – If you are age 70 ½ or older, you may have gifted some of your 2018 required minimum distribution (RMD) directly to charity, which is very important information for your CPA to have!  Despite telling custodians who to make the check payable to, they do not track if the payee is a registered 501(c)(3) organization.  Because of this, your tax form (Form 1099-R) could show that all distributions from your IRA are “taxable” when they potentially should not be.  Without a heads up from you, your CPA will not have any way of knowing how much of your 2018 RMD should be excluded from taxable income.  Fear not, relaying to your CPA the amount of your 2018 RMD that went directly to charity should be sufficient to ensure everything is captured accurately on your tax return.
  • Charitable Contributions – If you made gifts of cash, appreciated securities, or other property to qualified charitable organizations during the year, you will likely receive a letter from the organization documenting your gift.  Be sure to pass this information along to your CPA, as these donations are not captured on an IRS form.

Also, with a lot of talk around lower tax rates, increased standard deductions, and the doubled child tax credit, you may have thought you were in the clear from a tax liability standpoint.  But what if you still owe money with your 2018 tax return? If that’s the case, what can you still do to mitigate the liability?  Here are a few of the post year-end tax planning items that remain available for the 2018 tax year:

  • IRA Contribution Deduction – You have until April 15, 2019 to contribute to your IRA for the 2018 tax year.  In certain cases, you may qualify for this contribution to be tax deductible.  If you – and your spouse, if married – are not covered by an employer-sponsored retirement plan, you can deduct the full contribution to your traditional IRA no matter how much you earn.  However, the maximum you can deduct, per person, is $5,500 for 2018 and individuals 50 and older can put in an additional $1,000 as a “catch up” contribution.
  • Health Savings Account (HSA) Contribution Deduction – Similar to the IRA Deduction noted above, you have until April 15, 2019 to make a deductible contribution to your Health Savings Account (HSA) for the 2018 tax year.  The maximum deduction for the 2018 tax year is $3,450 for a single person and $6,900 for a family.  If you are age 55 or older, you are eligible for an additional catch-up contribution of $1,000 (this is different than the IRA contribution catch-up age of 50).  However, being able to contribute first requires that your health plan be HSA-qualified.

Hopefully the above information helps you to send appropriate documentation to your CPA and provides you with a few options to reduce your liability for the 2018 tax year.

No representation is being made that any strategy shown will or is likely to achieve results similar to those shown in this presentation. BDF does not provide legal, tax, insurance, social security or accounting advice. Clients of BDF should obtain their own independent tax, insurance and legal advice based on their particular circumstances. The information herein is provided solely to educate on a variety of topics, including wealth planning, tax considerations, insurance, estate, gift and philanthropic planning.