Reduce your taxable income dollar-for-dollar by contributing as much as you can to your 401(k) or employer’s retirement plan by Dec. 31.
If you are 18 or older, you can save up to $18,500 to your 401(k), and if you are over 50 you can kick in an extra $6,000. With IRAs you can contribute $5,500, and if you are over 50, an additional $1,000. (You have until the April deadline to make those IRA contributions.)
Additionally, if you are self-employed and contribute to SEP IRAs, you can deduct up to 25 percent of compensation or $55,000 for 2018.
“Make sure you’ve taken advantage of your employer’s match to your 401(k) plan. Better yet, make sure you’ve maxed out how much you can contribute,” said David Desmarais, a CPA at KLR, a Boston-based accounting firm.
“Leaving this benefit underutilized is the same as leaving money on the table.”
(If you contribute to a Roth 401(k) or Roth IRA, you won’t get a tax break, but your money can grow tax-free and generally be withdrawn tax-free in retirement.)