2019 Year-End Tax Planning

| December 03, 2019
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Consult with your tax professional to evaluate what steps may be taken now to optimize your tax situation and to see if any of the suggestions below are appropriate for you for this and future tax years.

Investment Accounts:

  • Roth IRA Conversions – Converting all or a portion of a traditional IRA to a Roth IRA might make sense if the tax-free retirement distributions in the future seem worth the taxes you may incur This may be especially beneficial considering current market conditions. TD Ameritrade’s deadline to process a Roth Conversion for 2019 is December 19th.
  • Retirement Plans - Maximize your 401(k) If you have a plan where your employer will match a prescribed amount of your contributions to the plan, take advantage of it. If you are a small business owner consider establishing a retirement plan. Please note, certain plans must be opened or funded by year-end. Signed paperwork for new plans must be received by our office no later than Dec. 30th. 
  • Harvest Tax Losses - Fluctuations in the stock market are Throughout the year, we actively review your accounts and place trades as needed to harvest tax losses as they become available while being cautious about gains. All trades must be placed by December 30th in order to appear on current year tax reports. Please let us know if you have any prior year loss carry-forwards and consider that while ordinary income tax brackets changed in with recent tax law reform, the capital gains rates and amount thresholds did not. 
  • Required Minimum Distributions - We monitor distributions from your accounts with us, however if you have IRAs or retirement plans held elsewhere and are over age 70½, confirm you have withdrawn the required minimum this There is a hefty tax penalty for not complying. Also ask us how utilizing Qualified Charitable Donations (QCDs) may help as well. 

Deductions:

  • Bundle Deductions - Since the standard deduction for taxpayers increased, you may want to consider bundling medical expenses, charitable contributions or adjusting the timing of when you pay state income and property taxes. By bunching these expenses into one year, rather than spreading them out, you have a better chance of exceeding the thresholds and thus maximizing your deduction. Consider the medical expense threshold for 2019 returned to 10%, up from 7.5% last Again, consult with your tax professional for individual advice. 
  • Gifting & Charitable Giving - Making financial gifts to charities is important to many of our clients. To maximize tax benefits, consider gifting appreciated assets that you have owned for over a year to a charity or Donor Advised Fund. Better yet, if you are over age 70½, you can donate to charities directly from your IRA that may count toward your RMD. This would allow you to get a tax benefit from the donation even if you no longer itemize your deductions! Gift requests must be submitted no later than December 19th to ensure processing. 

Healthcare:

  • Health Savings Accounts (HSA) - If you are not enrolled in Medicare and have a high-deductible health insurance plan, consider setting up an HSA for triple tax Contributions are deductible, investment earnings are tax deferred, and withdrawals are tax free if used for medical expenses at any age. Withdrawals not used for medical expenses at age 65 or older are treated much like IRA deductions. You can make contributions to your HSA through April 15th. 
  • Flexible Spending Account - Don’t forget to utilize any “use it or lose it” flexible spending accounts through your employer benefit

Got Kids?:

  • 529 Education Plans - Maximize contributions to 529 plans for possible state tax These plans can now be used for elementary and secondary school tuition as well as for college and vocational education expenses. 
  • Tuition Credits - Pay 2020 tuition in 2019 to take full advantage of the American Opportunity Tax Credit, worth up to $2,500 per student for tuition, fees and Forty percent of the credit (up to$1,000) is refundable, which means you can get it even if you owe no tax. 
  • Kiddie Taxes - From now through 2025 unearned income over $2,100 is now taxed at trust and estate This may have a big impact on how you structure investments owned by minors.

Small Business Owners:

  • Qualified Business Income Deduction - Non-corporation owners may be entitled to deduct up to 20% of their qualified business income (QBI) if their taxable income is under certain thresholds. This deduction is quite Please consult with your tax professional before year-end to see how to maximize this deduction for you.

Utilizing these and other strategies to limit your income may also help negate or lower additional tax expenses such as Medicare premiums, Net Investment Income Tax (NIIT), and the portion of your Social Security income that is taxable. Tax planning can be complex, and we are here to help simplify it for you. Please give us a call at (801) 568-9788 to discuss any items in more detail.

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