12 Tax Moves That You Should Make Now

START A 529 PLAN FOR YOUR KIDS

Even if your kids are very young, it’s never too early totry to prepare for the burden of college expenses. To be clear, 529savings plan contributions are not tax-deductibleon the federal level, although many states allow a state tax deduction forcontributions.

Instead, 529 contributions are allowed to grow and compoundtax-free, as long as the money is used for qualifying educational expenses.And, the tax reform bill just expanded the definition of qualified educationalexpenses to include elementary and secondary school (with limitations) inaddition to college, so there’s even more flexibility when it comes to usingthese tax-advantaged accounts.

ENROLL IN A DEPENDENT CARE FSA

If your employer offers it, you can contribute as much as$5,000 on a pre-tax basis to a flexiblespending account which you can use to pay for child care, or care for otherdependents you may have. While you can’t use this benefit and the child and dependent care tax credit for the same expenses,the FSA route usually is the better benefit.

One word of caution. If you and your spouse both have access to this type of accountthrough your employers, the $5,000 contribution limit is per household, not perperson. If you file using the “married filing separately” status, you can onlycontribute $2,500.

CONTRIBUTE TO A HEALTH SAVINGS ACCOUNT, IF YOU QUALIFY

A healthsavings account, or HSA, is often confused with the flexible spendingaccount (FSA), but it is a completely different type of account designed tohelp plan for healthcare costs.

To qualify, you need to be enrolled in a high-deductiblehealth plan, which is defined by the IRS as a deductible of $1,350 (self) or$2,700 (family) for 2018. These pretax accounts allow qualified individuals tocontribute as much as $3,450 for an individual or twice this amount if theyhave family coverage.