Looking to reduce income tax

[JBeez]

Hi Everyone,

I recently retired this past September at the age of 61. I accepted a lump sum severance payout, and looking for guidance regarding how to minimize the income tax for 2019. I’ve already maxed out my 401k contributions at $25k. I also contributed $2250 toward an HSA and was curious if I can still contribute the difference of $2250 to max this out as well? Can I still do this despite no longer employed? Aside from these and charitable deductions, are there other options available that will offset the taxes? Thanks in advance.

JB

 

[GrayHare]

if you have an HSA-compliant plan all year, yes, you can contribute to the HSA what the employer has not

 

[cathy63]

If you have a high deductible health plan for the entire year, you can contribute the max to your HSA. Otherwise you have to pro-rate the amount according to how many months you were covered under the high deductible plan from your employer. If you cannot contribute to the your previous employer's HSA plan now, you can open a free account at Fidelity and contribute the difference to that.

 

[Accidental Retiree]

Can you contribute to a traditional IRA for yourself and/or a spouse?

 

[Sunset]

Can you contribute to a traditional IRA for yourself and/or a spouse?

I believe OP can, but the income level will determine if it's a deduction or not.

 

[Sunset]

OP - sell some losing stock for a loss.

Charitable deductions are a poor way to try to reduce income, as you have to exceed about $24,000 (if married) when itemizing, which is a large amount. Especially when OP lives in a State with low property taxes.

 

[euro]

Since this is a one-time “Problem” (presumably income will be lower again next year and in the future), I’d seriously consider a Donor-advised Charitable Gift Fund. This basically allows you to take the tax deduction this year for all your future charitable donations, but actually spread those donation over however long a time (I.e. rest of your life) you want, so you still make annual donations, but reap the tax benefits right now when your income is particularly high.

 

[Big_Hitter]

OP - sell some losing stock for a loss.

+1

 

[gayl]

Since this is a one-time “Problem” (presumably income will be lower again next year and in the future), I’d seriously consider a Donor-advised Charitable Gift Fund. This basically allows you to take the tax deduction this year for all your future charitable donations, but actually spread those donation over however long a time (I.e. rest of your life) you want, so you still make annual donations, but reap the tax benefits right now when your income is particularly high.

+1!

 

[Finance Dave]

If you have a high deductible health plan for the entire year, you can contribute the max to your HSA. Otherwise you have to pro-rate the amount according to how many months you were covered under the high deductible plan from your employer. If you cannot contribute to the your previous employer's HSA plan now, you can open a free account at Fidelity and contribute the difference to that.

HSA plans are going the way of the dinosaur. We had 6 such options last year, only 1 this year and it's not financially attractive. Simply being a high-deductible plan is not enough...

https://www.valuepenguin.com/get-health-savings-account-hsa-if-you-can

 

[kgtest]

I believe OP can, but the income level will determine if it's a deduction or not.

Ahh I remember those days. Now it's 401kmax + Roth...and with 2 doing on 3 in daycare Roth is a stretch..Broker/Taxable is a real stretch but we make it work... Still haven't maxed BOTH 401k, someday.

 

[cathy63]

HSA plans are going the way of the dinosaur. We had 6 such options last year, only 1 this year and it's not financially attractive. Simply being a high-deductible plan is not enough...

https://www.valuepenguin.com/get-health-savings-account-hsa-if-you-can

Yes, OP needs to check and make sure his current plan is HSA eligible. He's only contributed 50% of the annual max and we know he had an employer HSA eligible plan until some point in Sept, so he can definitely contribute more this year.