December 11, 2019
CHECK YOUR WITHHOLDING: Many taxpayers had a big surprise last April - they owed taxes! To avoid another April surprise, use the IRS withholding calculator on the IRS website to see what you should have withheld for 2019 and compare this to your last paystub. If you are short you may want to have additional taxes withheld from your last few paychecks, or make a 4th quarter estimate, and potentially you may save yourself from underpayment penalties.
UPDATE YOUR WITHHOLDING FOR 2020: Use the IRS calculator and update a new W4 for 2020 with your employer.
INCREASE 2019 RETIREMENT CONTRIBUTIONS: Reduce your taxable income dollar for dollar by contributing as much as you can to your 401(K) or other retirement plan. You can have your employer increase your contribution on your last few payroll checks for 2019. If you work for yourself, you can set up a solo 401(k) or individual 401(k).
OFFSET CAPITAL GAINS WITH LOSSES: You can use losses to wipe out capital gains and then deduct an additional $3,000 loss against ordinary income. As an example, if you have $5,000 in capital gains, you can sell securities to get an $8,000.00 capital loss. The first $5,000 of losses would wipe out the capital gain and you would still have $3,000 of capital losses to offset $3,000 of ordinary income.
GIVE TO CHARITY: If you are still one of those taxpayers that itemizes and does not take the standard deduction, then you are still able to write off your donations. If you need an extra boost to surpass the higher standard deduction, then you may want to donate every other year instead of every year. If you are a high-income earner, you should consider a non-cash contribution such as appreciated stock or a direct charitable contribution from your required minimum distribution from your retirement account.
These are just a few examples of ways to reduce you 2019 taxes. Please call our office and set up an appointment to discuss more ideas tailored to your specific tax situation.
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