Last-Minute Tips to Lower Your Taxes

Tobie Stanger
Updated

Consumer Reports has no financial relationship with advertisers on this site.

Consumer Reports has no financial relationship with advertisers on this site.

The filing deadline for 2018 taxes is Monday, April 15. Here are some last-minute steps you can still take to save money on your federal return.

Plan for Retirement

  • Contribute to an IRA. You have until Monday, April 15, to contribute to a 2018 traditional IRA, a good way to save money and potentially reduce your taxable income. The maximum deductible contribution is $5,500 for those under age 50 and $6,500 for those 50 and older. Your deduction will be limited based on income and whether you or your spouse have a workplace-based retirement plan.

  • Add to a SEP IRA. Do you own a small business? Then you might be eligible for higher income and contribution limits for tax-advantaged retirement savings through a simplified employee pension, or SEP, IRA. IRS Publication 590-A, Contributions to Individual Retirement Arrangements, has details.

  • Contribute to a low-earning relative's IRA. Teens and young adults who had jobs generating W-2s for 2018—and in fact, lower-income workers of all ages—could gain a tax benefit if you help with a contribution to their IRAs. It helps them in three ways. They could be eligible for the Saver's Credit; for 2018, single filers who make $31,500 or less and contribute to an IRA can get a tax credit worth up to $1,000. Contributing to a traditional IRA also leaves workers with less taxable income, so they'll pay less in taxes.

    And if they need to buy medical coverage through a state health insurance marketplace, they can qualify for a larger health insurance premium tax credit. For someone to save money through these methods, the IRA contribution must be made before the tax deadline. (Starting in tax year 2018, contributions toward ABLE accounts for people with disabilities also can help beneficiaries earn a Savers Credit, though the deadline for those contributions was Dec. 31, 2018.)

Increase Your Health Savings

  • Contribute to a health savings account (HSA). You can still contribute to an HSA and have it count toward your 2018 taxes. But you can do this only if your health coverage for 2018 was considered a high-deductible insurance plan. HSA contribution limits for tax year 2018 are up to $3,450 for an individual and $6,900 for a family. If you're 55 or older, you can add $1,000 to those limits. Regardless of your income, you can get a tax break. To save money this way, you'll need to set up and fund a health savings account before midnight on Monday, April 15, the tax filing deadline.

Revisit Last Year's Tax Returns

The tax code allows for some losses or unused tax benefits to be carried over to subsequent tax years. Taxpayers often overlook this option, according to Barbara Weltman, contributing editor of "J.K. Lasser’s Your Income Tax 2019" (Wiley, 2018). For example: 

  • Business expenses. If you had a home business that lost money last year, you can carry over an unused home-office deduction. If you based the deduction on your actual costs, you weren’t able to take a deduction to reduce your business income for last year. That carryover can be used for an unlimited period. 

  • Capital losses. You can do the same thing with investment losses. Capital losses can offset capital gains and then up to $3,000 of ordinary income ($1,500 for married people filing separately) until they’re used up.

  • Charitable contributions. In the rare case where your charitable donations were so large that they bumped up against the IRS rule on charitable deduction limits, you can carry over the remainder into subsequent years, for up to five years. (Generally speaking, you may deduct cash contributions that equal up to 60 percent of your adjusted gross income, but 20 percent and 30 percent limitations apply in some cases.)



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