Deferring bonuses: It may be advantageous to try to arrange with your employer to defer, until early 2022, a bonus that may be coming your way. This could cut as well as defer your tax.
Beginning in 2018, many taxpayers who claimed itemized deductions year after year will no long be able to do so because of the doubling of the standard deduction. Remember that you can only take itemized deductions that exceed the standard deduction. Even worse, miscellaneous itemized deductions have been eliminated such as those for tax preparation and investment fees. Also, state and local taxes have been capped at $10,000. Finally theft losses and other big casualty losses are no longer allowed unless they were incurred in a federally declared disaster area. However, accumulating some medical expenses and prepaying some charitable deductions that you might make in future years could get you over the standard deduction threshold and allow you to itemize.
Consider using your credit card to pay deductible business expenses and even for charitable donations. Doing so will increase your 2018 deductions even if you don’t pay your credit card bill until next year. In addition, getting those extra points won’t hurt.
If you have a traditional IRA or 401K, you are required to take required minimum distributions by April 1 of the year following the year that you reach 70 and 1/2. Failure to take the require minimum distribution can result in a whopping 50% penalty of the amount of the required distribution not withdrawn.
Originally written in October 2018.
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