Determine Eligibility for Itemized Deductions. Year-end planning is required to determine if capped itemized deductions still exceed the modified standard deduction
Consider accelerating income into 2019 or delay income until 2020. Some people may benefit from lower tax brackets.
Max out your employer-sponsored retirement plan contributions. The deadline for funding 401(k), 403(b) or 457 plans is Dec. 31.
Evaluate the benefits of converting your Traditional IRA into a Roth IRA. Traditional IRA contributions are tax-deductible (the same year of contribution), and qualified Roth IRAs distributions are tax-free – your current & anticipated future tax brackets and other considerations are a factor.
Use highly appreciated securities for charitable contributions. If you are able itemize tax deductions, you can leverage your charitable gifts by limiting any capital gains tax you otherwise would absorb.
Harvesting of capital losses. If you have investment losses in a taxable account, you can sell them to offset gains from this year. If you have more losses than gains, you can deduct up to $3,000 against ordinary income; and if you have more than $3,000, you can carry over that amount to future years.
College savings 529 plans. You can invest up to $15,000 in 2019, tax-free, without incurring a federal gift tax, and many states offer state tax deductions for the contributions.
Use your gift tax exclusion. You can give up to $15,000 to as many people as you wish in 2019, free of gift or estate tax. If you combine gifts with a spouse, you can give up to $30,000.
Take Required Minimum Distributions (RMD). Uncle Sam requires that you withdraw money from retirement accounts after you turn 70 ½. (IRS rules are complicated, so please consult irs.gov for more specifics). RMD withdrawals must occur by Dec. 31st and failure to make them results in a whopping 50% penalty on the amount that should have been withdrawn and wasn’t.
Seek advice when you “know not” If you don’t know where to start – seek reliable advice. Helping to optimize your tax burdens is an area that credible professionals can really make a difference.
Bonus! Check out a comprehensive list of the 2019 key tax planning numbers here
Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual. Please consult your tax advisor regarding your specific situation. The Roth IRA offers tax deferral on any earnings in the account. Withdrawals from the account may be tax free, as long as they are considered qualified. Withdrawals prior to age 59 ½ or prior to the account being opened for 5 years, whichever is later, may result in a 10% IRS penalty tax. Future tax laws can change at any time and may impact the benefits of Roth IRAs.