The time for 2018 tax planning is over, but there are still some things you can do to lower your federal tax. Once the year ends you will have lost your chance so act now.
Some quick tactics to reduce your personal federal tax include offsetting capital gains with capital losses, charitable giving (gifts/wealth transfers not required to be reported are limited to $15K), pay your assessed property tax or state taxes if your SALT is less than $10K, max out your retirement account contributions, and consider paying off those medical bills because the floor (currently 7.5% of AGI) goes back to 10% for 2019.
For small businesses you can accelerate paying bills (rent, mortgage, insurance, subscriptions and education) and delay invoicing customers until January. Beware that if you follow this strategy every year you will loose the effectiveness; it’s for windfall years. You can buy equipment or software that you need and probably write all of it off. Stock up on supplies; inventory and job materials follow different rules and you might not be able to expense those so ask your accountant. Have you asked your accountant if your business qualifies for the 20% deduction?
There are many within the tax community who are predicting a shake-up in the 2018 filing season because of the changes under the Tax Cuts and Jobs Act. The big reason is that the payroll withholding amounts decreased in conjunction with the lowering of the tax rates. Any refund that you are used to getting; well that’s not going to happen. You might even owe a small amount of tax – not because your taxes went up, but because your withholding went down even further.
So check your withholding if you want to head off any surprises come April 15. You can use the IRS’s withholding calculator available here: https://www.irs.gov/individuals/irs-withholding-calculator. You may want to make sure that you set some money aside.
If you make quarterly estimated tax payments, the fourth quarter is due by January 15.