“Shop Till You Drop” isn’t just a motto this holiday season.
U.S. consumers are expected to spend a brisk $1,007 on gifts, candy, decorations, and other purchases for themselves and family, according to the National Retail Federation. “Americans in the Mood to Spend This Holiday Season,” says Gallup, which projects that 33% of all shoppers will spend even more—a cool $1,000 on gifts alone.
But shoppers have only until December 31 to save on their 2018 taxes—after that, it will be too late. Business writers can help by reporting on one or more of these money-saving moves:
- “Harvest” Investment Tax Losses or Gains. Stock market volatility in 2018 drove big gains and big losses, which makes it a perfect year for “harvesting.” Tax loss harvesting in an investment account owned in an account that isn’t an IRA, 401(k) or other type of retirement account reduces your tax bill. Tax gain harvesting is the other side of the tax picture and is equally beneficial. Singles earning up to $37,950 in taxable income, or married tax filers with taxable income up to $75,900, pay 0% on long-term capital gains and qualified dividends.
- Give Up Your Last Paycheck of the Year. It may be worth it, if your income pushes you into a higher bracket and your employer contributes to a 401(k) plan. An employer may allow a deferred contribution, but otherwise the deadline is Dec. 31. The deadline for a solo 401K plan, an Individual Retirement Account (IRA) or Health Savings Account is April 15, 2019.
- Use it or lose it. That’s the money an employer contributes to a Flexible Spending Account (FSA). Some will roll over $500, or grant a grace period, but most employers take back the money they gave you if you don’t use it by December 31. Like HSAs, FSAs pay for a wide range of medical expenses, like deductibles, copayments and coinsurance, and monthly prescription costs.
- Deduct Healthcare Expenses. Medical and dental expenses must exceed 7.5% of Adjusted Gross Income and be itemized, according to the Internal Revenue Service (IRS). Deductible expenses include health insurance, Medicare premiums, premiums for long-term care insurance, nursing home costs, and other costs. The IRS provides a list of deductible charges.
- Take Your “RMD.” That’s your Required Minimum Distribution from an IRA, a Simple or SEP-IRA, or retirement plan account by April 1 following the year you turn 70 ½. Failing to take a distribution on time will cost you 50% of the required distribution. The IRS provides calculation tables.
- Convert. To a Roth IRA, that is. The money grows tax free and doesn’t require distributions, as in a Traditional IRA. Consumers can use an online calculator to determine if is this is a smart move for them.
- Fund your (grand)child’s education. Set up a new “529” plan, or add to an existing plan by December 31; either way, be sure to take advantage of your state’s tax deduction.
- Donate to charity. If you don’t need your RMD—donate the money to charity. The Qualified Charitable Distribution (QCD) allows account holders to give up to $100,000 from a Traditional IRA without having to include the distribution in taxable income.