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Ajay Kumar, CPA


Five Quick Mid-Year Tax Planning Tips

I would like to remind all my friends that a few minutes spent now on your tax planning can save you a lot of money (not counting the year-end frustration and hassle of finding all those receipts), This is perfect time to make some tax moves to lower your 2018 taxes, since you already have a good idea of what your income for the year going to be, and you still have plenty of time to take advantage of some easy tax-cutting strategies.
1.)     Consider a Portfolio Adjustment: Check your investments for gains and losses and consider sales before Dec. 31. You may normally deduct capital losses up to the amount of capital gains, plus $3,000 from other income.

2.)     Give appreciated assets to your adult children: Give the appreciated stocks or mutual funds (instead of cash) to your children. When they sell, they may pay lower taxes on the gain than you. The long-term capital gains rate for taxpayers in the lower income tax bracket (with taxable income up to $38.7K for singles or $77.4K for married couples) is 0%. You can give securities valued at $15,000 per person in 2018 without filing a gift tax return; if you’re married, you and your spouse can give $30,000 to any number of people.

3.) Take advantage of tax-deferred accounts: Elective deferrals you make to employer-sponsored 401(k) plans for 2018 must be made by Dec. 31 and you can contribute up to $18,500 to a 401(k) plan. However, you have until April 15, 2019, to contribute to an IRA and still have it counted for 2018. For 2018 you can contribute up to $5,500 to a traditional or Roth IRA, and up to $6,500 if age 50 or over.

4.) Donate appreciated securities (Instead of Cash): Donating appreciated stocks or mutual funds to charities used to be the strategy for high-income taxpayers, but with higher capital gain tax rates, now it makes sense for everyone. By giving appreciated assets, you not only avoid taxes on the gains but also get to deduct the full value of the securities donated.

5.) Plan ahead for medical deductions: Deducting medical expenses is getting more difficult. To qualify for a write-off, your un-reimbursed medical expenses must exceed 7.5% of your adjusted gross income in 2018 (which will increase to 10% from 2019). So, try getting the braces and all other medical expenses that you can defer and plan in the same year.

Ajay Kumar, CPA

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