Tax season is upon us and you might be asking what can you still do that can potentially reduce your overall tax liability. Here are 5 big deductions that people often don't ask about or overlook come tax time.
- Charitable Mileage- Most taxpayers are very good at keeping receipts of their cash donations that they make to the organizations they donate to during the course of the year. One of the deductions few taxpayers pay attention to is the charitable mileage deduction. For 2018, you can deduct .14 cents per mile driven for rendering gratuitous services for charitable organizations. Don't forget fees and tolls as well (irs.gov). Consider the amount of time that you give gratuitously during the course of the year for your religious organizations, charitable causes you support, or possibly coaching a one of your kid's teams.
- Non-Cash Charitable Contributions Most taxpayers literally get a blank receipt from the Salvation Army, Goodwill, or some other charitable organization and then tell their accountants that they donated a bag or two for $50. What a huge mistake!! The reason you have the blank receipt is to itemize everything you give away line by line to maximize the legitimate deduction. You could go to satruck.com to see the Salvation Army's list of low and high value per item, but then again you need to really examine the true fair market value of each item. Make sure you have good documentation and receipts. You can also look into something called Donor Advised funds (ask us!) if you want to use cash to maximize charitable contributions here in 2018!
- Georgia Film Tax Credits- Did you realize that making movies in Georgia could actually benefit you? Most companies get a 30% tax credit to make films in Georgia, but what most taxpayers don't realize is that you can purchase tax credits from the film companies to lower your overall tax liability. This would be a good reason to meet with us and let us show you how this works.
- Can you do a tax-deductible IRA? -
The basic requirements for the IRA tax deduction
First of all, to be eligible for the IRA deduction, you must contribute to a traditional IRA. Traditional IRAs are tax-deferred retirement accounts, meaning that your contributions might be tax-deductible now, but your eventual withdrawals will count as taxable income.
Roth IRAs have several advantages, but an immediate tax deduction isn't one of them. Roth IRA contributions do not qualify for the IRA deduction, but qualified withdrawals will be 100% tax-free.
In addition, you need to be eligible to contribute to an IRA at all, which means that you have earned income, which includes wages, salaries, tips, bonuses, etc. In other words, if all of your income comes from investments or from a business you don't have an active role in, it doesn't count for IRA eligibility purposes.
Finally, your contributions must be made in a timely manner. For IRA purposes, this means that you can contribute during the calendar year itself, or during the next calendar year before the tax deadline passes. In 2018, this means your contributions must be made between Jan. 1, 2018 and April 15, 2019.
Income limitations: Are you eligible to participate in an employer's retirement plan?
For some people, the ability to take the IRA deduction is income-restricted. This depends on how much you earn and whether you or your spouse, if applicable, can participate in an employer's retirement plan.
First, the easy part. If you're not married and are not eligible to participate in a retirement plan at work, you can take advantage of the IRA deduction regardless of your income, provided you meet the requirements outlined in the previous section.
If you do have a retirement plan at work, such as a 401(k), 403(b), pension plan, etc., your ability to take the IRA deduction is income-restricted. Specifically, here's a guide of the AGI limits for your tax filing status.
| 2018 Tax Filing Status | Full Contribution Limit | Partial Contribution Phaseout |
| Single or head of household | $63,000 | $73,000 |
| Married filing jointly | $101,000 | $121,000 |
| Married filing separately (ifyou lived with your spouse at any point during the year) | $0 | $10,000 |
DATA SOURCE: IRS.
Here's how to interpret this table. If your AGI is below the "full contribution limit" threshold for your filing status, you can deduct 100% of your traditional IRA contributions up to the 2018 annual limit applies to you. If your AGI is between the full contribution limit and the partial contribution phaseout, you can deduct some traditional IRA contributions but less than the annual contribution limit. Finally, if your AGI is higher than the phase-out limit, you cannot deduct any traditional IRA contributions in 2018.
The final situation is if you are not covered by an employer's retirement plan but you're married and your spouse is covered. In this case, your deduction is income-limited but with more generous AGI thresholds:
| 2018 Tax Filing Status | Full Contribution Limit | Partial Contribution Phaseout |
| Married filing jointly | $189,000 | $199,000 |
| Married filing separately (ifyou lived with your spouse at any point during the year) | $0 | $10,000 |
Schedule A of your tax return. Definitely consult your tax preparer on this one.
- Use Your Side Hustle To Boost Retirement Savings-
If you have self-employment or freelance income, open a solo 401(k). You must open it by December 31, although you have until April 15, 2019, to contribute and take a tax deduction for 2018. You can contribute up to $18,500 ($24,500 if you're 50 or older) to a solo 401(k), minus any contributions you've made to a 9-to-5 employer's 401(k) for the year. You can also contribute up to 20% of your net self-employment income to the plan. Contributions to the solo 401(k) can total $55,000 in 2018 (or $61,000 if 50 or older) but can't exceed your self-employed income for the year. Another option is to open a SEP account, but if you have just a little freelance income, you can contribute more money to a solo 401(k). SEP contributions are limited to 20% of net self-employment income, up to $55,000.
Go to www.oxygenfinancial.net to request a consultation if you want to meet before year end to see if you can save some money on your tax bill.
Ted Jenkin is a frequent guest columnist for the Wall Street Journal and Headline News Weekend Express. He is the co-CEO of oXYGen Financial. You can follow him on LinkedIn @ www.linkedin.com/in/theceoadvisor or on Twitter @tedjenkin.
Securities offered through Kestra Investment Services, LLC (Kestra IS), member FINRA/SIPC. Investment advisory services offered through Kestra Advisory Services, LLC (Kestra AS), an affiliate of Kestra IS. oXYGen Financial is not affiliated with Kestra IS or Kestra AS. Kestra IS and Kestra AS do not provide tax or legal advice.
The opinions expressed in this commentary are those of the author and may not necessarily reflect those held by Kestra Investment Services, LLC or Kestra Advisory Services, LLC. This is for general information only and is not intended to provide specific investment advice or recommendations for any individual. It is suggested that you consult your financial professional, attorney, or tax advisor with regard to your individual situation.
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