Personal Tax Planning Suggestions:
Save For Retirement
If you don’t have a retirement savings account it’s time to get one started.
If you DO have a retirement savings account it’s best to contribute the most money allowed under your plan before the end of the year (or before the end of next tax season). The government allows taxpayers to effectively reduce their tax liability (or increase their tax refund) by saving for retirement every year.
The savings limit for a traditional IRA is $6,000 for the 2019 tax year. If your effective tax rate is 15%+ you will reduce your tax liability (or increase your tax refund) by $900+ if you choose to save for retirement.
Contribute to an HSA (If Work Provides One...or...Start One Yourself)
Health Savings Accounts allow those who qualify to pay for their medical expenses using pre tax dollars.
Essentially those who qualify are allowed to take a tax deduction for the amount that they contributed to their HSA account for the year...up to a limit.
If you don’t have an HSA through work, and your current health insurance plan has higher than average deductibles you may be able to start an HSA on your own.
Maximize Applicable FSA Spending Before The Deadline
Flexible spending accounts are employer sponsored plans that allow employees to pay for medical costs or child care with tax free dollars taken out of their salary.
Most FSAs have a “use it or lose it” rule. If employees have those types of accounts they must spend it all by the end of the year to get the full tax benefits.
Check all the details of your account to make sure you can maximize your tax benefits.
Sell Deadbeat Investments If It Fits Your Situation
If you have investments such as stocks that are valued lower than when you first purchased them you may be able to sell these by the end of the year and offset some of your income.
If you have capital gain income for the year, meaning you sold some investments at a higher price than when they were first purchased, selling some of your investments at a loss could be a good fit for your situation. The losses that you take in selling these investments can offset your capital gain income.
NOTE if you take more capital losses than gains for the year you will only be able to deduct a maximum ceiling amount of $3,000 in net capital losses over capital gains.
Plan To Itemize? Pay Those Expenses Before Dec 31st
Since the Tax Cuts of Jobs Act of 2018 have been placed into effect, only about 30% of Americans itemize their tax deductions these days. If you are part of that group be sure to make your itemized expenses happen before year end to receive the maximum tax benefits for the year.
Making Your Year End Mortgage Payment On Time
Contribute to a College Savings Plan (529)
College savings plans are a win-win for all involved.Savings plan contributors and their beneficiaries don't even need to be related.
These special accounts allow individuals to help others, or themselves, save for college. They allow contributors to take a tax deduction on their contributions (up to a limit). Also, these types of accounts can hold investments and their growth is tax free saving the beneficiary big money when it comes time to pay for college.
Prepay A Family Member’s College Tuition
If you can make it happen, you can get a tax credit towards paying for college tuition for yourself, your spouse, or one of your dependents, even if its a prepayment for next semester.
There are a couple of tax credits that would be a good fit for this situation, if the person attending college is still in their first four years the tax benefits are slightly higher than if the person is past their four year mark.
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Business Tax Planning Suggestions
Own a Business? Maximize Those Business Deductions
Be sure to keep a tight rein on your bookkeeping so all of your expenses are counted accurately and you’re able to take all the deductions you can on the money you spent.
Business Mileage tracking is another big tax deduction for business owners. Be sure to keep your business mileage log updated. For 2019 the IRS is allowing business owners to deduct $0.58 a mile for all business travel dirven using your personal vehicle
Have an office at home for your business? Prepare documents needed to take the home office deduction. Be sure to gather copies of: past utility bills for the year, home insurance bill, mortgage interest (or rent) paid for the year, and the square footage of your home office in relation to your total home square footage.
Consider Changing Your Business Structure
Statistics show that over 50% of businesses could benefit from a change in their legal structure.
There are a lot of rumors and advice floating around on this issue. I would recommend speaking with me or another tax professional to discuss the costs and benefits of a structure change for your specific business and life situation. I often see many business owners starting an S-Corp believing that is the best path for everyone no matter what...but...that isn’t always the case, and they end of wasting money for years on this type of set up.
Consider A Comprehensive Tax Plan (Advanced Strategies)
Forming tax plans for my clients are my specialty.
I start by thoroughly reviewing each individual’s business and life situation.
Then I perform an analysis on 60+ advanced tax strategies and choose those that are the best fit for the client.
The client will then receive their very own customized tax plan and I discuss the plan with them in detail.
Often times my clients can save an estimated $20,000+ in taxes with a comprehensive tax plan.