There's
still time to reduce your potential tax obligation and save money this year
(and next). Here are some ideas to consider:
- Estimate
your 2019 and 2020 taxable income. With these estimates
you can determine which year receives the greatest benefit from a
reduction in income. By understanding what the tax rate will be for your
next dollar earned, you can understand the tax benefit of reducing income
this year AND next year.
- Fund
tax-deferred retirement accounts. An easy way to reduce your
taxable income is to fully fund retirement accounts that have tax-deferred
status. The most common accounts are 401(k)s, 403(b)s and various IRAs
(traditional, SEP and SIMPLE).
- Take
your required minimum distributions (RMDs). If
you are 70½ or older, you need to take RMDs from your retirement accounts
by Dec. 31. Don't forget to make all RMDs because the fines are hefty if
you don't — 50 percent of the amount you should have withdrawn.
- Manage
your gains and losses. Rebalance your investment portfolio
and take any final investment gains and losses. When you have more losses
than gains, up to $3,000 can be used to reduce your ordinary income. With
careful planning, you can take advantage of this loss amount each year.
- Finalize
your gift-giving strategy. Each year you may gift up
to $15,000 without tax reporting consequences to as many individuals as
you choose. Consider any gift-giving you wish to make up to the annual
limit. This could include gifts of cash or property, and investments. The limit is per taxpayer, so a married
couple could provide up to $30,000 in gifts to one individual with no tax
consequences.
- Donate
to charities. Consider making end-of-year donations to eligible
charities. Donations of property in good or better condition and your
charitable mileage are also deductible. Receiving proper documentation
that acknowledges your contributions is important to ensure you obtain the
full deduction. Have a plan by knowing your total deductions for the year
to help you decide how much and when to donate. Pulling some donations
planned for 2020 into 2019 may be a good strategy if you expect to itemize
on your 2019 income tax return.
- Organize
records now. Start collecting and organizing your
tax records to avoid the scramble come tax season.
- Develop
your own list. Use these ideas as a jumping off point
to create your own list of annual review items. It might also include
reviewing college savings accounts, beneficiaries, insurance needs, wills,
trusts, and going through an aging parent's financial accounts.
Questions
about the most effective money-saving moves for your situation? Call us at
(219) 769-3616 or email them to tlynch@swartz-retson.com.
