26 Nov 4 Things You Should Do Now to Reduce Your 2019 Tax Liability
The holiday season has officially arrived. And, while you may be focused on Christmas shopping, family gatherings, and holiday parties, it’s also a good idea to take some time to examine your taxes. Far too many people wait until the New Year to worry about their taxes, and by then, there’s very little you can do to impact your tax return. However, if you start looking at your taxes now, you may be able to take steps to reduce your tax liability. Here are just a few options that might be available to you.
Meet with a CPA
First and foremost, now is the time to meet with your CPA. Not only are most tax accountants in Provo more available at this time of year (as opposed to during the middle of tax season), but they can also help you to examine your return and find what last-minute changes you can make or steps you can take to get the best outcome possible on your return.
The vast majority of deductions you can take on your return must be done before the end of the year, so you’ll want their input now so that you have enough time to get those things taken care of before the ball drops.
Retirement Account Contributions
One option you might be able to consider in order to reduce your taxable income for 2019 is to contribute to qualifying retirement accounts. This is a popular option for many individuals, because you’re reducing your taxable income for the year while still retaining your money for future use.
IRAs are a very common way for taxpayers to quickly reduce their taxable income towards the end of the year. You can contribute a maximum of $6,000 to an IRA account each year ($7,000 if you’re 50 or older). You do have a bit of extra time for this contribution though, as the deadline to write off IRA contributions for 2019 is April 15th of 2020. Keep in mind that if your work offers a retirement account, and dependent on your income level, there may not be a deduction for these contributions.
You can also deduct contributions to your 401k account. However, these contributions must be made by December 31st of this year if you hope to deduct them on your return. There may also be other limitations on those contributions, so it’s good to plan these out with a CPA.
Many people donate to charity during the holiday season—after all, there’s a reason people call it the season of giving. However, you can also utilize charitable contributions to reduce taxable income, which can be quite helpful if you’re aiming to fall below a certain tax bracket, or qualify for other support or deductions based on your taxable income.
Charitable donations to qualifying organizations are entirely deductible, so it is a quick and easy way to reduce your tax liability. But you do need to get those donations made before the end of the year to write them off. If you always give during the holidays, it may be a good idea to go over your finances and determine if a slightly higher donation may be wise this year.
Additionally, it’s important to be aware that you can deduct donations of items, as well as any cash donations you might make to a qualifying charity. This means that, if you donate food to a food drive, toys to a toy drive, or an old car to a charity organization (all of which are common charitable efforts during the holiday season), you can deduct the value of those items on your taxes. Just try to get a receipt for your donation, and if that’s not possible, be sure to keep detailed records of your donated items and their approximate value.
Selling Stocks at a Loss
Most people know that the goal of the stock market is “buy low, sell high.” And, of course, most people know that doesn’t always happen. While you may not necessarily want to sell stocks at a loss, it is an option if you’re looking to reduce your taxable income. Losing money on your stocks can qualify as a deduction to reduce your income, as well as reducing what you owe on your tax return. Be sure to consult with your CPA on this first, however.
There are a few other options available to most taxpayers that can help you to reduce your tax liability for 2019. If you’re looking to pay less on your 2019 tax return, be sure to schedule an appointment with one of our tax accountants in Provo first. We’ll help you find the best options available based on your unique situation.