The tax year for most people across the country, including here in Massachusetts, ends on Dec. 31. Some people may think they have run out of time to prevent the IRS from taking even one more dollar than necessary at tax time. Fortunately, there may still be time to take steps to make that happen.
Losses from investments could provide a way to lower tax obligations, and many people may need to take advantage of this possibility this year. Individuals could also max out their retirement account contributions. Doing so reduces taxable income dollar for dollar. Massachusetts residents could also make charitable contributions, which could be written off at tax time. Taxpayers need to make sure that the charity is properly registered and keep records of their contributions, however.
For those who have been waiting to contribute to a 529 college savings plan, now is the time. The credit or deduction varies depending on the state, so it would be prudent to determine the value of the contributions ahead of time. Speaking of college, prepaying tuition is another way to potentially lower an individual’s 2019 tax bill. Opening an ABLE account for a child with special needs is yet another way to earn a break on this year’s taxes.
There may be other ways for taxpayers to limit their payment obligation to the IRS by the end of year. However, with all of the recent changes in the tax code, identifying them could require some assistance. Consulting with a tax attorney could reveal other areas where an individual could obtain credits, deductions or other reductions to taxable income.