We’re approaching the end of the year. Are you ready for the upcoming tax season? There are a lot of changes that went into effect in 2018 due to the Tax Cuts and Jobs Act. The new law may affect how much you owe in taxes for the 2018 tax year, and is definitely changing the year end planning process.
Now that the standard deduction has been raised, many Americans will choose to focus on year-end tax strategies that will lower 2019 taxable income, especially since itemizing deductions will not be beneficial for most taxpayers. Have you made the proper moves? Here are some tax moves you might want to consider before the end of the year.
As always, you should try to reduce your taxable income as much as possible before the end of the year. Contributing to an IRA, Health Savings Account, and retirement plan are all standard moves. You should also take advantage of your flex plan if your employer offers it since that reduces your taxable income.
You should also accelerate any tax credits or adjustments to income into December and defer income to 2019.
Expecting a large increase in income for 2019?? Consider the opposite strategy and push as much income into this year as possible and pay deductible items in January, 2019.
Review Your Tax Withholdings
The tax reform that went into effect this year may have changed your take home pay due to withholding changes. Have you checked your withholding? Make sure you’re not having too much or too little taken out. It’s not too late to make an impact this year and you can also make changes for 2019. The final 2018 quarterly estimated tax installment is due January 15, 2019.
Sell Your Securities at Losses. Donate Your Winning Securities (if you will be able to itemize)
If you had some losses this year that are in a taxable account, consider selling to realize the loss. These losses can offset other taxable gains you had during the year and still allow losses up to $3,000.
If you have a big winner in your portfolio, consider giving it to charity. This move could give you a double tax break. You may avoid paying capital gains tax on your profits and possibly take a charitable donation on your tax return, but only if you would benefit by itemizing.
Review Your Business Structure
A big change in the tax law this year is how business entities are taxed. Corporate tax rates were cut, and pass through entities will get a break. Is your business structured to take advantage of these breaks? Every bit counts. You can read more about that here.
Make Bigger Tax-Free Gifts
Another change in the tax law was a boost in the lifetime gift tax to $15,000 and estate tax exemption (from $5.49 million to $11.18 million). Giving more now can reduce the amount your estate pays later.
Consult a Tax Pro
There are a lot of ins and outs to The Tax Cuts and Jobs Act. Don’t go into the new year blind. Make an appointment to see one of our tax professionals before the end of the year so we can guide you towards the right moves for your particular tax situation. Make an appointment online or give us a call at 804-204-1040.