For Mark Roberts’ Use: Your 2019 income tax return isn’t due until April of next year… So why would you want to think about it now?
Actually, there are plenty of good reasons to consider your tax situation toward the end of the year. By anticipating your income tax debt, you can take steps to potentially reduce the amount owed. But since these decisions must be made by the end of the day on December 31, get started now.
- Make an extra mortgage payment – the interest is deductible, plus if you do this every year you can pay off your mortgage several years early
- Make charitable contributions – this valuable deduction can reduce your taxable income, but only if you choose a charity qualified by the IRS
- Max out your health savings account contributions, and lower your taxable income – individuals can contribute up to $3,500, while those with a family plan can stash $7,000
- Pay medical bills – you can deduct qualifying medical expenses that exceed 10 percent of your AGI
- Pay your property taxes – these are also deductible, up to $10,000
- Avoid future estate taxes – if you’re concerned about estate taxes after you pass away, you can gift up to $15,000 per person, tax-free each year during your lifetime
- Take advantage of investment losses – sometimes it makes sense to sell losing investments to take advantage of the capital gains offsets
- Max out your IRA contributions and lower your taxable income – you can contribute up to $6,000 this year, or $7,000 if you’re age 50 or older
- Max out 401(k) contributions and lower your taxable income- you can contribute up to $19,000, or $25,000 if you’re age 50 or older
- Take your RMD, if you’re over age 70 ½ – if you haven’t done so by the end of the year, you could be subject to a stiff tax penalty
Of course, we definitely don’t recommend that you take tax advice from a blog. These ideas should provide some inspiration for potential pathways to reducing your overall tax debt. But don’t make any decisions without consulting with an expert first. Give us a call if you have any questions, especially regarding retirement plan contributions or required minimum distributions, and we can help you figure out the most beneficial way to proceed.