Here's What You Need to Remember: TurboTax also recommended, “loss harvesting,” where you sell investments such as stocks and mutual funds to realize losses. You can then use those losses to offset any taxable gains you have realized during the year.
Time is running out to file your 2020 federal tax return. This year, the deadline was extended from the normal April 15 date to May 17 due to the coronavirus pandemic. Quarterly estimated taxes were still due last month, so if you haven’t gotten those in, then don’t wait any longer in order to avoid additional interest to the government.
However, for those late filers, there are some last-minute tips in reducing your tax bill.
Make an IRA Contribution
Normally, you’d have to make your Individual Retirement Account (IRA) contributions by now for last year, but just as the tax filing has been extended so too have IRA contributions. Those have been extended until May 17. The annual contribution limit is $6,000 for most individuals, plus an additional $1,000 for taxpayers who are fifty or older.
If you haven’t already maxed out on your 2020 IRA contribution, then now is the time to do it. And while previously those people age seventy and older couldn’t contribute, the rules have changed as well.
“For 2020 and later, there is no age limit on making regular contributions to traditional or Roth IRAs,” according to the IRS. “For 2019, if you’re 70 ½ or older, you can’t make a regular contribution to a traditional IRA. However, you can still contribute to a Roth IRA and make rollover contributions to a Roth or traditional IRA regardless of your age.”
Make a Deductible Health Savings Account (HSA) Contribution
The same holds true for an HSA contribution, which can be up to $3,550 for self-only coverage or $7,100 for family coverage. Additionally, the write-off for HSA contributions is an above-the-line deduction. That means you can take the write-off even if you don’t itemize.
Don’t forget to itemize your good deeds, which can include donations you made as well as any volunteer work you did. If you drove to make a donation or volunteered, then you can deduct your mileage at $0.14 per mile.
Most people can claim up to $300 in charitable contributions under the Cares Act on top of the standard deduction. The only catch is that the charity must be a 501-C3 not-for-profit business in order for the IRS to take the deduction.
Add Up Those Health Insurance Premiums and Other Medical Expenses
Medical bills can cause extra stress, but if you itemize your deductions on your tax return, you can potentially claim a deduction for qualifying medical expenses from last year. That includes premiums for private health insurance coverage and premiums for Medicare health insurance.
Reinvest Your Dividends
TheStreet.com recommends that you lower the amount of gain that you’re recognizing as taxable by reinvesting dividends to the cost of your stock that you sold or your transactions to lower your gain.
TurboTax also recommended, “loss harvesting,” where you sell investments such as stocks and mutual funds to realize losses. You can then use those losses to offset any taxable gains you have realized during the year. Losses offset gains dollar for dollar. Moreover, if your losses are more than your gains, you can use up to $3,000 of excess loss to offset other income; while more than $3,000 in excess loss can even be carried over to the next year. Losses can even be carried over year after year for as long as you live.
Peter Suciu is a Michigan-based writer who has contributed to more than four dozen magazines, newspapers and websites. He regularly writes about military small arms, and is the author of several books on military headgear including A Gallery of Military Headdress, which is available on Amazon.com. This article first appeared earlier this year.