With the April 17, 2018 tax filing deadline approaching, it’s not too late to consider some strategies that could reduce taxable income.
Investors may want to consult with an advisor who understands their individual financial situation before taking advantage of these strategies.
- Contribute to an individual retirement account (IRA). Taxpayers may make a tax-deductible contribution prior to the tax-filing deadline of April 17, 2018. Also, if a taxpayer’s spouse does not work outside of the home, a contribution can be made into a spousal IRA.
- Add to a health savings account (HSA). Individuals who are eligible for an HSA may make a contribution prior to April 17 and include it in their 2017 filing. Contributions to HSAs are still deductible even if taxpayers do not itemize their deductions.
- Fund a Simplified Employee Pension (SEP) IRA. Small-business owners, sole proprietors, and freelance workers still have time to fund a SEP-IRA before the tax-filing deadline. Investors can take a federal income tax deduction equal to the amount of their employer contributions, up to a maximum of 25% of compensation paid during the year. For the self-employed or freelancers, the deduction is limited to 20% of net earnings after expenses.
With the tax season underway, it’s an opportune time for advisors to communicate with investors, especially those who may have questions about the tax status of health savings accounts. Also, small-business owners and sole proprietor clients, who may not have established a retirement savings account, may benefit from establishing a SEP-IRA for the current tax year.