2019 Tax Planning
Now is the time to review your tax planning approach before year end.
Below is a list of tax planning tips to consider before the end of year.
- If your out-of-pocket medical expenses, including certain health and long-term care premiums, are close to or exceed 10% of your gross income, consider having elective procedures this year.
- Make your January 2020 payment in December 2019.
Charitable Donations & Gifts
- Donate your planned 2020 giving this year.
- Contribute appreciated assets, such as stocks or shares in mutual funds, that have been held at least one year.
- Consider establishing a Donor-Advised fund. This allows a larger charitable deduction this year, and flexibility to contribute smaller annual amounts over many years.
Gifts to Children
- Take advantage of the annual gift tax exclusion. You and your spouse can give up to $15,000 to each person in 2019 without paying gift tax or tapping your lifetime estate and gift tax exemption. That is $60,000 from parents to their married child.
- If you are thinking of selling appreciated securities and you held them for at least one year, the gain is taxed at capital gains rates of 0%, 15% and 20%.
- Sell assets that have losses to offset the gain this year.
- Sale of substantially identical securities purchased 30 days before or 30 days after, are excluded for capital gains treatment.
- Municipal bond interest is excluded from US tax and from the 3.8% net investment income tax. They may also be excluded from state income tax.
- REIT and publicly traded partnership income receives a 20% deduction.
- Review that you will receive Required Minimum Distributions if you are over 70½. There are special rules for your first required minimum distribution.
- Make charitable donations directly from your traditional IRA as part of your required minimum distribution.
- Maximize your 401(k) deferral by December 31st. You can defer up to $19,000, or $25,000 if you are 50 or over. Employers and some self-employed retirement plans can contribute another $37,000.
- Use the balance of your health and dependent care FSA.
- Consider electing to contribute to a health or dependent care FSA for 2020. Up to $2,750 for individuals and $5,000 for a married couple filing jointly ($2,500 if married filing separately) can be contributed.
- Contribute to your child’s or grandchild’s 529 account. Contributions to a qualified Colorado fund receive a Colorado income tax deduction.
Withholding & Estimated Payments
- Estimate 2019 US and state taxes and increase withholding for the amount due.
- Remember that 4th quarter US and state estimated tax payments are due January 15, 2020.
- Many new and used asset purchases qualify for 100% bonus depreciation. Significant savings are also available for tenant improvements.
- Pass-through Income from many businesses can qualify for a special 20% income deduction.
- There are qualifying rules that need to be met for these opportunities. They are not available in all circumstances.
- Pay anticipated January 2020 expenses this year and delay your invoicing for December until January 2020.
These tax tips are designed to limit income taxes, but some have potential pitfalls that should be reviewed by a CPA before implementation. In addition, it’s important to let your CPA know about any life events which occurred during the year as they may impact tax planning efforts. For additional information on the tips provided above or to schedule a tax planning review, call us at 303-388-1010. We look forward to speaking with you soon.