Year-end 2018 tax-saving moves for individuals

Although there are only about five weeks left to go before the year ends, here are four ways to implement some planning moves that can improve your tax situation for 2018 and beyond.

1.Nail down losses on stock while substantially preserving one’s investment position. A taxpayer may have experienced paper losses on stock in a particular company and wants to keep an investment. The taxpayer may be able to realize his or her losses on the shares for tax purposes and still retain the same, or approximately the same, investment position. This can be accomplished by selling the shares and buying other shares in the same company or another company in the same industry to replace them, or by selling the original holding then buying back the same securities at least 31 days later.

2. Apply a bunching strategy to deductible contributions and/or payments of medical expenses. Beginning in 2018, many taxpayers who claimed itemized deductions in prior years will no longer be able to do so. That’s because the standard deduction has been increased and many itemized deductions have been cut back. A bunching strategy can help taxpayers get around the new reality—namely accelerating or deferring discretionary medical expenses and/or charitable contributions into the year where they will do some tax good.

3. Retirement plan distribution. An individual can take an eligible rollover distribution from a qualified retirement plan before the end of 2018. Income tax will be withheld from the distribution at a 20% rate and will be applied toward the taxes owed for 2018. The individual can then timely roll over the gross amount of the distribution, as increased by the amount of withheld tax, to a traditional IRA. No part of the distribution will be includible in income for 2018, but the withheld tax will be applied pro rata over the full 2018 tax year to reduce previous underpayments of estimated tax.

4. Use IRAs to make charitable gifts. Taxpayers who have reached age 70-½, own IRAs, and are thinking of making a charitable gift should consider arranging for the gift to be made by way of a qualified charitable contribution, or QCD—a direct transfer from the IRA trustee to the charitable organization. Such a transfer (not to exceed $100,000) will neither be included in gross income nor allowed as a deduction on the taxpayer’s return.