How to Save on Your 2019 Taxes
Investors know that a great portfolio requires strategic planning and consideration of economic factors that would impact your investments. So, it’s not unusual to think about how 2019 tax changes could affect your investment decisions as you look ahead to preparing to file your 2019 taxes.
Here are among the things you should be thinking about before the end of the year:
1. Contribute the maximum to your IRA
You can contribute as much as $6,000 to an IRA, up $500 from 2018. If you’re age 50 or older, you can make an additional $1,000 contribution.
2. Defer some income if you can
You only pay taxes on the income you receive during a given year. So, you can put off paying some taxes by deferring some income. While this may be difficult for salaried employees, consider deferring some income until next year. Perhaps you can defer your annual bonus, for instance. If you’re self-employed, it may be easier to delay payments until 2020. You may want to consult your accountant, however, because this only makes sense if you’re going to stay in the same or lower tax bracket next year.
3. Think about more deductions you can take
Here are some itemized deductions worth paying attention to:
Make your charitable donations by December 31, 2019 because charitable donations are deductible, and the cash donation limit is 60% of adjusted gross income (AGI).
State and local income taxes, property taxes, and real estate taxes are capped at $10,000.
The mortgage interest deduction is a tax deduction for mortgage interest paid on the first $1 million of mortgage debt. Homeowners who bought houses after Dec. 15, 2017, can deduct interest on the first $750,000 of the mortgage.
Medical expenses more than 10% of adjusted gross income (AGI) can be deducted.
No miscellaneous itemized deductions are allowed.
4. Contribute more to your flexible spending account (FSAs)
If your employer offers a health care FSA, take advantage of the increase in contribution limits. Your employer dictates what you can contribute, but the IRS maximum for 2019 is $2,700. Contribution limits for dependent care FSAs, remains at $2,500 for individuals and $5,000 for married couples or individual heads of household.
5. Consider “loss harvesting”
You may want to consider selling some stocks in your portfolio to realize losses, which can then offset any capital gains to reduce your overall tax burden. Losses will offset gains dollar for dollar so this could be a winning strategy for you.
6. Save on taxes with your health savings account (HSA)
The maximum amount you can contribute to an HSA for 2019 is $3,500 for an individual and $7,000 for a family. If you’re age 55 or over, you can contribute an extra $1,000.
7. You may qualify for the child tax credit
Kids are great, especially since the child tax credit could even be paid back as a tax refund. And, did you know that tax credits reduce your taxable income?
You may be eligible for a tax credit of up to $2,000 per dependent child age 16 and younger, if your household income is below $200,000 for single filers or $400,000 for joint filers. If your child is 17–24, you may still qualify for a credit of up to $500.
8. Beware the “kiddie tax”
A child’s investment income above $2,200 is taxed at the same rate as trusts and estates, which are usually higher than individual tax rates, so you may want to stay under that amount.
9. Alternative minimum tax (AMT) exemption could impact investment decisions
For 2019, the AMT exemptions are $71,700 for single filers, $111,700 for married taxpayers filing jointly, and $55,850 for married taxpayers filing separately. The phase-out thresholds are $1,020,600 for married taxpayers filing a joint return and $510,300 for all other taxpayers.
10. Give More, Save More on Estate Taxes
The unified estate and gift tax exemption is now $11.4 million for 2019. It’s higher than last year, but will expire at the end of 2025.
The gift tax exemption, which allows you to “gift” investments to family members, remains at $15,000 per recipient.
