Year-End Tax Planning Tips

Excerpts from the TGIF 2 Minutes Archives:

The beginning of October means we are in the 4th Quarter… and the countdown begins to year-end. The following are excerpts from the Year-End Tax Planning Checklist.* Several of these items, if addressed now, could make a big difference to your 2019 tax filing AND add to your savings.

variety of pumpkins
The beginning of October means we are in the 4th Quarter… and the countdown begins to year-end.

1: How are you doing on maxing out your 401k?  Many people do not know they can temporarily increase their 401k contributions through December 31st to reach the $19,000 maximum contribution. Lots of 401k or 403b plans allow participants to contribute 25-30% of pay… or even 100% and then revert to the lower contribution percentage on January 1st of next year.

  • These 401k contributions can be tax-deductible (unless you are contributing to a Roth 401k). It is not too late!

2: For those who have already maxed out the 401k for this year (great job!) think about contributing the same dollar amount per paycheck to another savings vehicle through the end of the year… such as a vacation fund, emergency fund or kids’ college funds.

3: Don’t have a 401k? Consider contributing to a tax-deductible IRA. The deadline is April 15th of next year to make the 2019 contribution.

4: For non-working spouses who do not get to contribute to a 401k, consider contributing from the working spouse’s income to a separate IRA for the non-working spouse; this vehicle is called a “spousal contribution” to an IRA and can possibly be tax-deductible.

5: Are you Self-Employed?  How many employees do you have, if any? Consider a tax-deductible contribution to a SEP-IRA. SEP contributions can be as high as $56,000 and can be done as late as September of NEXT year or upon filing the business’ tax return.

6: “Tax loss selling.” Check with your financial adviser if there are investments in non-IRA accounts that have losses.  These capital losses can be “realized” (meaning the investment is sold for a loss) and the losses used to offset the capital gains in a portfolio and can also be carried forward indefinitely. This selling needs to be done by December 31st. Check with your tax adviser!

7: If you inherited an Inherited IRA in 2019 then you most likely need to take an “RMD” (Required Minimum Distribution) from the IRA by December 31st of next year – OR THIS YEAR. Ask me about this one.

8: If you are over 70½, it is time to take an RMD that represents the total of ALL your IRA, 401k or pension (or other annuity) balances by December 31st of THIS year.

For all of these items – and more – there is still time in 2019 to accomplish valuable tax-deductions or to create new savings vehicles beyond your imagination!

Please ask for additional ideas and strategies, especially for those who are self-employed or if income is much higher (or lower) than last year.

*Always consult with a CPA for tax advice and planning.


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