Well with 2019 here and all worried about taxes. We here at Flattop Bookkeeping have a few tax tips.
The Tax Cuts and Jobs Act increased the amount of the standard deduction from $6,500 to $12,000 for individuals, $9,550 to $18,000 for the head of household and $13,000 to $24,000 for married couples filing jointly. So, if you do not have enough deductions to exceed the threshold take the standard deduction. Aside from charitable contributions, consumers can accelerate tax deductions, such as an estimated state tax bill, property tax bill due early next year, or a doctor’s or hospital bill. These can be beneficial when itemized under the bunching method.
Max your retirement contributions
Maximizing your retirement plan reduces your taxable income, which will reduce your tax bill. 2018, the maximum 401(k) contributions is $18,500 or $24,500 if over age 50. Those who cannot afford the maximum amounts should try to contribute at least the amount matched by employer contributions.
Take your required minimum distributions (RMD)
Those over the age of 70 and a half or older with retirement accounts need to take the required minimum distributions by the end of this year. If not, heavy penalties of 50 percent can be expected. Be sure to work with a professional to take out an appropriate amount. Combining RMDs with qualified charitable contributions can help lower your tax bill. Sending your RMSs directly to a qualifying charity, your adjusted gross income won’t increase, and you may be able to take a charitable deduction.
Engage in tax loss harvesting
Under IRS rules, you must pay taxes on any investment gain you realize in the year. Tax-loss harvesting is a strategy that involves selling poor performers in your portfolio to offset gains. Under current law, you can claim up to $3,000 in capital losses against non-investment income (or $1,500 if married and filing separately.) You can carry forward into future tax years any losses over $3,000.
Take advantage of annual exclusion gifts
This year, the maximum amount of gift tax exemption increased from $14,000 to $15,000. This means you can give up to that amount to a family member without having to pay a gift tax. Parents can best take advantage of this by gifting their children $15,000 into a trust or a 529 plan, which is a tax-sheltered plan for college expenses.
Do some charitable giving
Charitable giving doesn’t only take form in cash contributions; you can also donate items to local charities and write their market values off as an itemized deduction on your taxes. Depending on the charity, you can donate things like gently used clothing, furniture, working electronics and more. According to the IRS, charitable contributions to private organizations are limited to 30 percent of your adjusted gross income; public charity gifts are limited to 50 percent of AGI.
Defer your income
Those who get a year-end bonus might want to consider waiting to take it until the following year if their employer allows this. By delaying the income, you postpone additional taxes for 2018.
Get your health coverage in order
The Tax Cuts and Jobs Act of 2017 eliminated the individual penalty for not having health insurance, it doesn’t go into effect until 2020; the penalty for not being insured will continue to be enforced this year. The penalty for not having insurance this year is $695 per adult or 2.5 percent of household income, whichever is greater.
Update your beneficiary designations
While this doesn’t affect your taxes now, it could affect the taxes of your loved ones in the future. Year-end is a great time to review your beneficiaries and think about any big life changes that may make you want to consider updating your beneficiaries. Why is it important? Down the road, it will help minimize any taxes your beneficiaries pay on your assets when you pass.
Protect yourself from fraud
Whenever you’re filing documents with sensitive information like your Social Security number, it’s imperative to take the necessary precautions to prevent your data from being compromised. Filing taxes should be done directly on the IRS website or that of a trusted tax preparer. Additionally, be cautious about giving your personal information to a third-party platform. Setting up direct deposit with the IRS for your refund is wise, and if you owe money, be sure to send it through IRS Direct Pay
If you have any questions regarding tax preparation, let Flat Top Bookkeeping help you. We provide tax services in Utah and have over 21 years of experience. We hope that all of you will have an excellent tax season.