Although the door closed on most tax-saving strategies on New Year’s Eve, there are still ways to lower your 2018 tax bill.
Contribute to a health savings account: You have until April 15 to set up and fund a health savings account for 2018.
To qualify, you must have had an HSA-eligible insurance policy at least since Dec. 1. The policy must have had a deductible of at least $1,350 for individual coverage or $2,700 for family coverage.
You can contribute up to $3,450 to an HSA if you had single coverage or $6,900 if you had family coverage. You can contribute an additional $1,000 if you were 55 or older in 2018, or another $2,000 if you were married and both of you were at least 55.
Contributions to an HSA will reduce your adjusted gross income. The money in your account will grow tax-free, and withdrawals used to pay medical expenses are also tax-free.
Many employers pair an HSA with a high-deductible health insurance plan.
If you don’t have access to an HSA through work, many banks and other financial institutions offer the accounts. You can find HSA administrators at www.hsasearch.com, where you can compare fees and investing options.
Be aware, once you enroll in Medicare, you are no longer eligible to contribute to an HSA.
Contribute to an IRA: You also have until April 15 to contribute to an IRA for 2018. If you’re not enrolled in a workplace retirement plan, you can deduct an IRA contribution of up to $5,500, or $6,500 if you’re 50 or older.
Contributions will reduce your adjusted gross income on a dollar-for-dollar basis, which could make you eligible for tax breaks tied to your AGI.
Workers who have a company retirement plan but earn less than a certain amount may qualify to deduct all or part of their IRA contributions.
For 2018, this deduction phases out for single taxpayers with AGI of between $63,000 and $73,000; for married couples who file jointly, the deduction phases out between $101,000 and $121,000.
If one spouse is covered by a workplace plan but the other is not, the spouse who isn’t covered can deduct the maximum contribution, as long as the couple’s joint AGI doesn’t exceed $189,000. A partial deduction is available if the couple’s AGI is between $189,000 and $199,000.
