Timely Tax Tips and the Spirit of Giving, seem to fit nicely as the holiday season approaches.
Though the year is close to ending; you still have plenty of time to use the helpful tax tips outlined in this blog.
As a result, planning now can benefit you in a big way when tax time rolls around in April.
With the new tax reform, the tax laws have changed substantially and because of this, you should look at ways to minimize your tax liability.
Considering these tax changes, it’s a smart move to speak with your tax advisor NOW to know about all the ways you can keep your money instead of handing it over to the IRS.
In this blog, we’ll cover some timely tax tips to make your holidays blissful!
Timely Tax Tip #1: Maximizing Your Retirement Accounts
You should strongly consider depositing the maximum amount allowed into your retirement accounts by December 31st, especially if your place of employment matches contributions!
You can make tax-deductible contributions to IRAs up to April 15, 2020, but, your deadline for 401(K) and Health Savings Account contributions is December 31, 2019.
The tax-deductible contributions for a traditional 401(K) can be found here.
#2: Convert to a Roth IRA
While withdrawals from traditional IRAs are taxed in retirement, it’s the opposite for Roth IRAs, where withdrawals are tax-free!
Another one of the great things about Roth IRAs is that there are no minimum distributions, which can also benefit you in reduces your taxes during retirement years.
Word of advice, because you would be paying taxes on the converted amount, be sure as a result that the amount converted does not bump you into a higher tax bracket.
Consult a tax professional with any questions you might have.
#3: Get Flexible
Many employers offer flexible spending accounts to their employees as a part of their benefits.
And a benefit they are because these flexible spending accounts can be used to pay your qualified medical expenses TAX-FREE!
The key point to remember is that most FSA Accounts have a use it or lose it provision that states they must be used by year’s end or you lose the funds.
Make it a priority to be in the know about tax savings and utilize any and all benefits you have.
Timely Tax Tip #4: Deferred Income
If your compensation package from your employer includes something like a year-end bonus, or you are self-employed; then deferring income to the next year can be a beneficial tax strategy.
Deferring income is only a good strategy if you expect you will be in the same or a lower tax bracket the following year.
If you believe that deferring your income until 2020, for example, may put you into a higher tax bracket, then DON’T!
If you are considering deferring income, then speak to a tax professional to make sure you defer the proper amounts under the new tax laws.
#5: Charitable Contributions
The holidays are a time of giving and the ideal time for you to catch up on your charitable contributions.
Donations to many organizations are tax deductible.
The holidays can be a win-win-win for you, charitable organizations and those who are less fortunate.
Be sure to keep good records and all receipts of any contributions or donations so you have them close by when it’s time to do your taxes.
From all of us here at Borshoff Consulting, our wish is that you and your family have a Happy and Blessed Holiday Season.
