5 Ways To Cut Your 2019 Tax Bill Now

5 Ways To Cut Your 2019 Tax Bill Now

Congrats. You filed your 2018 tax return. But don’t stuff it in a file cabinet just yet. Instead, look it over to uncover steps you can take right now to lower your 2019 tax bill. The IRS revised the withholding table early in 2018 which resulted in less withholding for most taxpayers and consequently smaller refunds or even balances due at tax time. Check to see if you may need additional withholdings from your paycheck. The IRS calculator can help you with that. Use IRS Form W-4 to indicate any additional amount you want to be withheld. A W-2 tax form highlighting wages that have been subject to Social Security and Medicare taxation.

Evaluate your filing status

Choosing your filing status is generally a straight forward decision, but it can pay to compare the filing statuses you are eligible for each year.

A married couple can file jointly or separately, but in most cases filing separately is unlikely to decrease the overall tax bill.If, however, one spouse has substantial unreimbursed medical expenses, filing separately will lower their adjusted gross income and allow the spouse with significant unreimbursed medical expenses to obtain a higher deduction amount.

Maximize chances for pre-tax dollars

Maximizing the use of pre-tax dollars is a smart way to lower your 2019 tax burden. Ask your human resources department about any your pre-tax employee benefits. Those might include health and/or dependent care flexible spending accounts, commuter benefits; a Section 125 premium-only insurance plan, and a health savings account (HSA).

Maximize chances to defer income

Maximize how much you contribute to your employer-sponsored retirement plan. Employees who participate in 401(k), 403(b), most 457 plans, and the federal government’s Thrift Savings Plan can contribute $19,000 this year. Plus, those aged 50 and older can contribute an additional $6,000 to their retirement plan.Once you maximize your 401(k), consider funding your IRA. There are income limitations if you are a participant in a 401(k) and want to do an IRA but the limits are getting higher.

Review investments for tax efficiency

Search for ways to harvest tax losses to offset any gains you may have recognized or will recognize during 2019. Tax loss harvesting, for example, is the practice of selling a security that has experienced a loss as a way to offset taxes on both gains and income. When harvesting tax losses, be sure to keep in mind the wash-sale rules when buying back into the market.

According to the Securities and Exchange Commission, a wash sale occurs when you sell or trade securities at a loss and within 30 days before or after the sale you buy substantially identical securities. Internal Revenue Service rules prohibit you from deducting losses related to wash sales.

Control what you can

If you are under the standard deduction threshold because of the new $10,000 cap on state and local tax (SALT) deductions should focus on what they can control. Since charitable deductions are fully controllable, bunching your charitable contributions into a single year, rather than contributing smaller sums over several years, may put you over the new standard deduction hurdle. For 2019, the standard deduction amounts are $12,200 for individuals, $18,350 for heads of household, and $24,400 for married couples filing jointly and surviving spouses.

If you have any questions on how we can help you reduce your 2019 tax bill, click here to speak with one of our tax professionals.

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