Year-End Tax Planning Ideas

Tips to Help You Save


As the end of 2019 is approaching, now is the time to review strategies that can help you maximize your tax savings. The Tax Cuts and Jobs Act of 2017, the largest tax law change in 30 years, may have altered the approach you need to take in preparing for year’s end. However, with some thoughtful planning there are still ways to take advantage of savings opportunities.


Take advantage of flexibility

Will you be taking standard or itemized deductions? The new tax law increased the standard deduction to $12,200 for single filers and $24,400 for joint filers. If you will be itemizing, you will want to consider everything from medical costs to mortgage payments and how to use these to your advantage. If your medical expenses exceed 10% of your adjusted gross income, you may deduct them. It might be helpful to pay for a major expense such as dental work in 2019 so that you may increase the likelihood of meeting the minimum threshold to be deductible. If you make the January 2020 mortgage payment on your residence before the end of 2019, you can deduct the interest portion in 2019.


Gifting for Education

Gifts and contributions to your children or grandchildren’s education can provide a way to build education savings plans, get tax-free appreciation if the funds are used for qualified education expenses and possibly even a state tax deduction. You can help pay for future education expenses by contributing to 529 plans in an amount up to $75,000 per year per beneficiary, or up to $150,000 if your spouse also pays in. For tax purposes, if you give the maximum, it’s considered as gifting $15,000 (or $30,000) to that beneficiary in 2019 and each of the next four years through 2023. These payments are excluded from your estate as long as you live through the fifth year. New York also gives an annual tax deduction for contributions of $5,000 for Single filers and $10,000 for Joint filers.


Charitable Donations

In addition to cash and goods, you can also donate appreciated assets to charitable organizations. If you’ve owned the property (i.e., individual equity) for more than a year, generally you can deduct its full value and there is no tax obligation on the appreciation.

If you have a favored charitable organization that you plan on donating to over the next few years, you may want to consider making a larger donation less often. By combining several smaller donations into one, it’s more likely that you can exceed standard deduction limits and receive a tax benefit on your contribution in the year it is made.

Be mindful of deadlines when writing checks to charity and have it in the mail early enough to reap the benefit of a 2019 deduction. The envelope must be postmarked by December 31st to count as a 2019 gift. Donations made using a credit card can be claimed in the year the card was charged.


Benefit Plans

If you haven’t yet put in the maximum contribution to your 401(k), 403(b) or other retirement accounts, consider adding in year-end bonus money until you reach the 2019 limit of $19,000 ($25,000 if you’re age 50 or older). Some retirement plans, such as IRAs and Roth IRAs, have a contribution deadline of April 15th and lower contribution limits of $6,000 if under age 50 and $7,000 if age 50 or older.

As the new year approaches, it’s a good time to review your retirement plan beneficiaries. Life changes such as a divorce, marriage or death of a loved one may require you to make updates to retirement accounts, pensions and wills as necessary.


Verify Withholding and Estimated Tax Payments

No one likes to receive a surprise tax bill on April 15th. Now is a good time to do a projection of your 2019 tax liability to determine if your withholding and estimated tax payments are on target or if you need to either increase withholding or make a tax payment before year-end.


Business Taxes

Depending on what may offer the greatest benefit, business owners can shift year-end income and expenses between 2019 and 2020. Businesses that expect to be in a higher tax bracket in 2020 can speed up some billings to collect in 2019. Or, you can postpone billings until 2020 if you would be better off with less revenue in 2019.


As tax codes have changed, it can be challenging to keep up with the most current ways that you can benefit from smart planning. Working closely with your accountant can help assure you are making smart tax decisions. Please contact us if we may be of assistance.


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