Time to take a page from one of America’s Most Popular Game Shows, Jeopardy!
“Whether they like it or not, every American is confronted by this massive, confusing stressful expense year in and year out.”
“What are Income Taxes!”
There is no getting around having to pay taxes. What you can do is to try and minimize the amount of taxes you owe, so you’ll have more money available to save toward your financial goals and other things. In the interest of helping you minimize your tax bill here are some great tax saving strategies sure to keep your money where it belongs, the location of your choosing.
1. ADJUST YOUR TAX WITHHOLDING
Simply put, every time you earn income, you will most likely owe taxes. How much you pay in taxes is determined by your form W-4.
You can adjust your W-4 at any time during the year, keep in mind that adjustments made later in the year will have less of an impact on your taxes for that year.
Each year taxpayers are surprised in realizing that they’ve either over withheld or under withheld on their taxes.
You can use our paycheck withholding calculator to help determine whether you are likely to be on target based on your current tax filing status and the number of W-4 allowances claimed. In the event of a projected tax surplus, you may be able to increase your W-4 paycheck withholding allowances and, thereby, increase your paycheck amount.
2. INCREASE YOUR 401K CONTRIBUTION
Since 401(K) contributions are pre-tax, the more money you put into your 401(k), the more you can reduce your taxable income, all while building your retirement savings even more. The $19,000 limit in 2019 includes all elective employee salary deferrals, as well as any after-tax contributions made to a designated Roth account within your 401(k).
3. INCREASE YOUR IRA CONTRIBUTION
Traditional IRAs are great for people needing an immediate tax deduction or those who want to defer income in the hope that their tax bracket might be lower sometime in the future. The tax deduction along with the tax-deferred growth that a Traditional IRA brings can help to build a nice retirement fund.
The Traditional and Roth IRA contribution limit increase by $500 to $6,000 in 2019. If you are age 50 or older, you can contribute an additional $1,000 under the catch-up contribution rule.
4. HEALTH SAVINGS ACCOUNT
The advantage with an HSA is that you can make the tax-deductible contribution here without needing to itemize your deductions.
Under a HAS, you can make a tax-deductible contribution of up to $3,500 for those who are single and up to $7,000 for a family in 2019. The catch-up contribution rule of an additional $1,000 applies here for those age 55 or older.
5. FLEXIBLE SPENDING ACCOUNT
FSA’s or Flexible Spending Accounts are similar to HSAs except for the fact that they have smaller contribution limits.
Because with an FSA you would generally forfeit any unused benefit by year-end, the best option here is to fully use all funds contributed to the plan before the end of the year.
6. QUALIFIED BUSINESS INCOME DEDUCTION
Another terrific tax-saving strategy is the qualified business income deduction that allows small businesses to deduct up to 20% of their qualified business income. This applies to S Corporations, LLCs, partnerships, and those filing Schedule C.
7. A 529 PLAN
Here’s some terrific news for anyone wanting with a 529 savings plan or those wanting to start one. In the past, funds from 529 savings plans could only be used to pay college level costs. Now the plan has been expanded to allow the use of up to $10,000 in 529 plans to pay tuition in grades K through 12.
This is a terrific benefit if you have children in private schools or are considering a move like that this year.
The $10,000 limit is per account, so for example, if you have two plans for your child, the limit is $20,000.
Here are some additional Tax Saving Strategies we use at Borshoff Consulting:
- Splitting income among several family members or legal entities in order to get more of the income taxed in a lower bracket.
- Shifting income or expenses from one year to another in order to have them fall where it will be taxed at a lower rate.
- Deferring tax liabilities through certain investment choices such as pension plans, contributions, and other similar plans.
- Using certain investments to produce income that is tax exempt from either federal or state or both taxing entities.
- Finding tax deductions by structuring your money to pay for things you enjoy, such as a vacation home.
Remember, we work for you, not for the IRS. Many of our clients save many times the fee in reduced tax liability through careful planning and legitimate tax strategies.
Schedule your free consultation today.