Pixel Tracker

Sunday, January 20 , 2019, 10:20 pm | Partly Cloudy 57º

 
 
 
 

Karen Telleen-Lawton: Last-Minute Tax-Saving Tips

Dear Karen: Do you have some last-minute tax tips? I know you’re not an accountant or a tax attorney, but I’m asking for a financial planning viewpoint. I’ve done my own taxes since the 1980s, and sometimes I wonder if I could be missing something.

— Do-It-Yourselfer

Dear Selfer: Some people actually enjoy doing the taxes, like my husband. It’s an annual puzzle with familiar faces but frequently changing rules.

My first tip would be to see a professional tax accountant every few years. He or she can reassure you that you’re not making any big errors, and perhaps find you enough tax savings to pay his or her fee.

There are some tax actions you can do all the way up until your filing deadline. One move you can do if you have a high-deductible medical plan is to establish a medical HSA account (Health Savings Account) for the previous year. Another is to put money in an IRA or Roth IRA for the just-ended tax year.

In deciding whether to set up a Roth IRA or a traditional IRA, it increases your financial plan’s flexibility if you have both. At retirement it’s great to have withdrawal options. Then, depending on your taxable income and the tax laws in any given retirement year, you can draw from IRA, Roth and savings to best minimize your tax obligation.

If your income is too high to fund a Roth IRA ($191,000 in 2014 for joint), you may be able to establish a “back door Roth.” To do this, you fund a nondeductible IRA ($5,500 to $6,500 depending on your age, using after-tax income) and then immediately convert it to a Roth regardless of income. There are limitations and drawbacks depending on your particular situation, so read up on this and check with your accountant.

Do you have adult children or your parents living with you? Here are a few deductions that may be applicable. You probably know you can you claim adult children as dependent up to age 24 if they are full-time students living at home, as long as they paid for less than half of their own support including college costs and food. You can actually claim any relative as a dependent as long as you provided more than half their financial support, and their total income (excluding Social Security) is below certain levels.

Speaking of Social Security, if you start collecting before age 65 and then return to work — as is happening a lot these days — you’re better off halting your Social Security payments. The reason is, your benefit checks will be temporarily reduced by a portion of your income. Those benefits are eventually reinstated, but it could be a hassle. If you work after your full retirement age, a paycheck doesn’t affect your Social Security benefit.

Finally, when your accountant reviews your tax forms, remember to add the bill to your other investing and tax expenses. If your expenses for investment management, tax advice, professional, business and investing publications, tax-preparation software, and safe-deposit box to store securities total over 2 percent of Adjusted Gross Income, you’ve just found yourself another deduction. But you may want to examine whether you need to be spending that much to manage your investments!

— Karen Telleen-Lawton’s column is a mélange of observations spanning sustainability from the environment to finance, economics and justice issues. She is a fee-only financial advisor (www.DecisivePath.com) and a freelance writer (www.CanyonVoices.com). Click here to read previous columns. The opinions expressed are her own.

Support Noozhawk Today

You are an important ally in our mission to deliver clear, objective, high-quality professional news reporting for Santa Barbara, Goleta and the rest of Santa Barbara County. Join the Hawks Club today to help keep Noozhawk soaring.

We offer four membership levels: $5 a month, $10 a month, $25 a month or $1 a week. Payments can be made using a credit card, Apple Pay or Google Pay, or click here for information on recurring credit-card payments and a mailing address for checks.

Thank you for your vital support.

Become a Noozhawk Supporter

First name
Last name
Email
Select your monthly membership
Or choose an annual membership
×

Payment Information

Membership Subscription

You are enrolling in . Thank you for joining the Hawks Club.

Payment Method

Pay by Credit Card:

Mastercard, Visa, American Express, Discover
One click only, please!

Pay with Apple Pay or Google Pay:

Noozhawk partners with Stripe to provide secure invoicing and payments processing.
You may cancel your membership at any time by sending an email to .(JavaScript must be enabled to view this email address).

  • Ask
  • Vote
  • Investigate
  • Answer

Noozhawk Asks: What’s Your Question?

Welcome to Noozhawk Asks, a new feature in which you ask the questions, you help decide what Noozhawk investigates, and you work with us to find the answers.

Here’s how it works: You share your questions with us in the nearby box. In some cases, we may work with you to find the answers. In others, we may ask you to vote on your top choices to help us narrow the scope. And we’ll be regularly asking you for your feedback on a specific issue or topic.

We also expect to work together with the reader who asked the winning questions to find the answer together. Noozhawk’s objective is to come at questions from a place of curiosity and openness, and we believe a transparent collaboration is the key to achieve it.

The results of our investigation will be published here in this Noozhawk Asks section. Once or twice a month, we plan to do a review of what was asked and answered.

Thanks for asking!

Click Here to Get Started >

Reader Comments

Noozhawk is no longer accepting reader comments on our articles. Click here for the announcement. Readers are instead invited to submit letters to the editor by emailing them to [email protected]. Please provide your full name and community, as well as contact information for verification purposes only.