As the year winds down, it’s time to get your
documents in order and make strategic decisions for
your taxes. This is especially important because a lot
of tax policy has changed from previous years, so you
would be well-served by taking these tax-planning
steps right now.
Here are some thoughts for those of you who want to
start working on that tax plan:
If you have any control over what your income
is for 2019 and 2020, now is the time to figure
out if you want more or less income in 2019 or
if you want to move it into 2020.
If you are able to make contributions to a
401(k), based on your self-employed
earnings, be sure to have the necessary
documents completed by Dec. 31, even though you do not have to make the
contribution until next year.
Be sure you have enough in all Schedule A
deductions to get over the limit for the
standard deduction amount (this limit varies
by age and filing status).
Here are several issues to consider in this area:
If you think you owe state taxes for 2019 when
you complete your return and you need the
deduction as part of your Schedule A Itemized
Deductions for 2019, make an estimated
deposit to the state before Dec. 31.
This is because you get the deduction in the
year you make the payment. If you are not
itemizing for 2019, then make this payment in
January 2020 for the 2019 taxes.
If you make charitable contributions, decide
whether to make them this year or next. If you
are itemizing for 2019, then date and mail the
checks by Dec. 31, 2019. If you are
using the standard deduction for 2019, date
and mail the checks with a January 2020 date.
This might be a good time to do house
cleaning and donate things that you don’t
need. Be sure to make a list, get the values
documented and get the items to the charity of
your choice. Save that receipt. Is it worth it to
do all of this work?
Well, for itemized deductions, if you are in the
25% tax bracket and can increase your
deductions by $1,000, then you give yourself
a $250 gift that you will get when you file your
return for 2019. If these items do not help you
for 2019, then they should help you in 2020.
Knowing now that you will have these savings
next year also allows you to consider
changing the withholding of taxes from your wages for the full year. That gives you a gift
that you receive every pay period for the next
Apart from planning your deductions, now is a great
time to figure out if you are able to contribute to a
Roth individual retirement account in addition to the
amounts you are contributing to your 401(k) or 403(b)
or other tax-deferred program at work.
For most of us, the Roth IRA is a very valuable part of
retirement planning. It is easy to set up so that by the
end of 2019, you have it all taken care of.
Meet with your Financial Advisor
So, get your 2019 pay stubs together and do a little
tax planning for 2019 and 2020 this month.
If you have some questions or need help, schedule
time to visit with your financial advisor so that you can
get your plan inked out.
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