Effective Tax Planning Starts Now!

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July 8, 2019

Posted in Tax

With summertime activities in full swing, tax planning is probably not on the top of your to-do list. But putting it off creates a problem at the end of the year when there’s little time for changes to take effect. If you take the time to plan now, you’ll have six months for your actions to make a difference on your 2019 tax return. Here are 4 ideas to get you started:

  1. Know your upcoming tax breaks.  Pull out your 2018 tax return and take a look at your income, deductions and credits. Ask yourself whether all these breaks will be available again this year. For example:
    • Are you expecting more income that will bump you to a higher tax rate?
    • Will increased income cause a benefit to phase out?
    • Will any of your children outgrow a tax credit?

Any changes to your tax situation will make planning now much more important.

  1. Make tax-wise investment decisions.  Have some loser stocks you were hoping would rebound? If the prospects for revival aren’t great, and you’ve owned them for less than one year (short-term), selling them now before they change to long-term stocks can offset up to $3,000 in ordinary income this year. Conversely, appreciated stocks held longer than one year may be candidates for potential charitable contributions or possible choices to optimize your taxes with proper planning.
  2. Adjust your retirement plan contributions.  Are you still making contributions based on last year’s limits? Maximum savings amounts increase for retirement plans in 2019. You can contribute up to $13,000 to a SIMPLE IRA, up to $19,000 to a 401(k) and up to $6,000 to a traditional or Roth IRA. Remember to add catch-up contributions if you’ll be 50 by the end of December!
  3. Plan for upcoming college expenses.  With the school year around the corner, understanding the various tax breaks for college expenses before you start doling out your cash for post-secondary education will ensure the maximum tax savings. There are two tax credits available, the American Opportunity Tax Credit (AOTC) and the Lifetime Learning Credit. Plus there are tax benefits for student loan interest and Coverdell Savings accounts. Add 529 college savings plans, and you quickly realize an educational tax strategy is best established early in the year.

Great tax planning is a year-round process, but it’s especially effective at midyear. Making time now not only helps reduce your taxes, it puts you in control of your entire financial situation. Reach out to us to get started!

 

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The commentary expressed herein reflects the personal opinions, viewpoints, and analyses of Johnson Bixby employees and is not necessarily that of Private Client Services, LLC and should not be construed as investment advice. The views expressed are subject to change at any time without notice. Johnson Bixby and Private Client Services do not offer tax or legal advice. Always consult a tax or legal professional regarding your individual situation. Nothing in this article constitutes personalized investment advice, an offer, or solicitation to buy or sell any specific security or adopt any specific investment strategy. Any reference to specific securities or performance is for illustrative purposes only and should not be considered a recommendation. Investing in securities involves risk, including the potential loss of principal. Past performance is no guarantee of future results. Diversification does not ensure against loss. Advisory services offered through Johnson Bixby, an SEC Registered Investment Advisor. Securities offered by Registered Representatives through Private Client Services. Member FINRA/SIPC.

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