Audit defense service TaxAudit has released its last-minute 2019 tax tips to help taxpayers be…
Audit defense service TaxAudit has released its last-minute 2019 tax tips to help taxpayers be proactive with their end-of-year tax and financial decisions that could potentially minimize their tax bill.
TaxAudit’s tips and strategies will help inform taxpayers about ways to potentially save money on their taxes and understand how the changes to the tax code under the Tax Cuts and Jobs Act will impact their tax return.
TaxAudit’s 2019 Eleventh Hour Tax Tips include:
Adjust your withholding. Review your withholdings to see if you need to make an adjustment. Take advantage of the IRS’s free withholding calculator to make sure your withholdings are not too high or too low.
You may remember that the IRS made available a W-4 in late 2018 that often caused a “surprise” at tax time. The IRS revised the form in 2019 for, hopefully, better results.
Take advantage of bonus depreciation. The Tax Cuts and Jobs Act changed the bonus depreciation for assets placed in service after September 27, 2017, and prior to January 1, 2023, to 100% deduction. There are a few income rules to review for each taxpayer’s individual situation.
Consider deferring year-end income until 2020. For taxpayers who receive a year-end bonus or collection of rents, business debts, and payments for services for cash basis taxpayers, consider deferring these to 2020 to potentially pay less tax depending on your tax rate and taxable income.
Pay off high medical bills. After being lowered to 7.5% in 2017 and 2018, the threshold for the medical expense deduction has increased to 10% for 2019.
If you are planning to itemize your deductions in 2020, consider paying for any unreimbursed medical expenses in December rather than waiting for next year.
Take advantage of educational tax benefits. If you paid for any college or school expenses, there may be credits available for you. Ensure you have all your receipts and records as well as a 1098-T form from the qualified educational institution(s). If you have a 529 plan, consider making contributions before the end of the year up to the allowable limit.
Remember alimony payments are no longer deductible. Alimony payments are no longer deductible for divorces and separations which took place after 2018. And that means the alimony received is not taxable either under these same guidelines.
Contribute to your favorite charities. However, if your standard deduction is higher than your itemized deductions you will not receive an additional benefit. You may want to consider making this year and next year’s charitable gifts before the end of 2019 if you do expect to itemize.
Sell poorly performing stocks if you’ve sold winners. If you’ve sold stocks at a gain this year, it’s not too late to sell under-performers to offset those gains. This is a popular strategy for reducing taxes, commonly referred to as “harvesting losses.”
Consider maximizing your contributions to your current retirement accounts (e.g. IRAs and 401(Ks). There are multiple contribution limits for 2019 depending on your situation. For example, the limit is $19,000 for 401(K) base contributions plus $6,000 for “catch-up” for taxpayers 50 and older. The base contributions for IRAs is $6,000 with $1,000 as “catch-up.”
Make sure your records are meticulous. You’ll need meticulous documentation for all expenses you plan to write off. The sooner you can collect your receipts, the sooner you can file your tax return.
Remember to check the rules before making any of these moves to make sure you understand how they apply to your specific situation.
Please note: This is only a short list of some tax moves taxpayers should make before the end of the year. Please spend time learning about the rules at IRS.gov so you are knowledgeable about qualifying deductions, exemptions, and more that may help to reduce your tax burden.
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