We are in the final days of 2019. And for those of you who are last minute, this is the last chance to save $$$ on your 2019 taxes. We have posted about changes in the tax code through the Tax Cuts and Jobs Act, but it is a good idea to go over your tax saving tips one more time. Accounting Services of AcctServices.org offers the following 7 tax saving tips.
- Max your contributions to your retirement plan. Put as much money as you can afford into your retirement plan. You’re paying your future self while reducing your tax bill. Win – win right?
- Donate to an approved tax exempt charity. The IRS.gov has a list.
- Spend the FSA Balance. If you have a Flexible Spending Account with money in it, spend it on qualified costs. such as medical prescriptions that can be refilled a little early, deductibles, blood sugar test kits etc.
- Did you know you can claim “above the line adjustments to income’? Adjustments above your AGI or adjusted Gross Income include IRA contributions, half of self-employment taxes you pay, student loan interest, alimony, Self-employed health insurance as well as health savings account contributions. Find out from a CPA which adjustments you can use. Just remember these deductions can be diminished by income related phaseouts.
- Hold off on mutual fund purchases. We are less than two weeks from the end of the year.
- If you are retirement age, delay your RMD (required minimum distribution). This is the amount of money that you must withdraw from a traditional IRA, a SEP (Simple IRA) or other retirement plans by April 1 of the year after you reach 70 ½. Advisors often recommend that you take your first RMD this year if next year is the deadline. It is true that if you take both next year, it could boost you into a higher tax bracket, unless you already know that next years income will be lower. It is worth looking at your position and discussing it with your tax planner. If you haven’t already found the tax planner you want to work with, visit AcctServices.org to be connected to a licensed, experienced tax professional who can guide you through a plan that makes sense for you.
Defer 2019 Income: This last tip, like the prior tax tip, is about deferring your year end taxable income to next year. This only makes sense if next years income projection will be lower than this year, but there are instances where you already know that will be true: if you relocated to be near family or loved one but had to take a pay cut to do that; if you are retiring at the end of 2019; if you are pregnant or your wife is and you will be taking an extended leave of absence as a new parent you may be facing lower income in 2020 and deferring year end 2019 to 2020. Of course, you can’t do this by not cashing your paycheck, but if you free-lance, or collect rent or are a contractor, you can collect the payment in two weeks in order to defer your income.