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7 Smart Tax Moves to Make Before December 31st

December 10, 2019

Taxpayers, time is running out to take advantage of tax savings before year end, including opportunity zones, charitable contributions and more. Don’t miss out!

Attention taxpayers…as you gear up for 2019 filing season, keep in mind that you need to implement most of your tax planning strategies to reduce your 2019 tax bill by December 31st! Our year-end tax planning guides will lead you in the right direction—here are some highlights.

Key things to do before December 31

  1. To itemize or not to itemize? Decide if it makes sense for you to itemize on your 2019 return or take the standard deduction. The TCJA increases the standard deduction to:
    -$12,200 for single filers and married filing separately,
    -$18,350 for heads of household, and
    -$24,400 for joint filers and qualifying widow(er)s.
  2. Opportunity zones- Investors, time is running out on getting the most from qualified opportunity zones (QOZs). In order to qualify for the maximum 15 percent amount of forgiveness offered under the Tax Code, the investment must be held for seven years before the end of 2026.

    Hence you have just about one month left to make the investment before the end of 2019! Check out our blog, Opportunity Zones: Invest in your Community while Saving Tax and our FAQ OZ blogs Part 1 and Part 2.
  3. Charitable contributions- Charitable contributions are tax-deductible in the year the contributions are made. Hence to make it count during the tax year, gifts must be made by December 31.

    Check out our blog, How will the TCJA Impact My Charitable Deductions?

    Since the TCJA nearly doubled the standard deduction, many taxpayers are less likely to itemize deductions, which poses some difficulties for charitable giving. The charitable deduction is only available to those who itemize their deductions. “Bunching” several years of charitable gifts into one year can push taxpayers above the threshold for itemizing deductions in that year and provide them with a deduction for the full value of their donation. Taxpayers can give less and simply claim the standard deduction in alternate years. You have to bunch by December 31 too!

    Not sure who you want to make charitable contributions to prior to December 31? Consider contributing to a donor advised fund that will allow you to take the deduction when contributed and decide on a charity later.
  4. Retirement plan contributions- Employee contributions to 401(k) plans and any other plans that require salary reductions/ elective deferrals must be made by December 31. You can contribute up to $19,000 in 2019 (or 100% of your compensation, whichever is less). To add to this, if you are over 50, you can make an additional $6,000 catch up contribution, for a total maximum contribution of $25,000.
  5. Take RMDs- Are you 70 ½ or older? If you turned 70 ½ in 2019, you are required to take your first required minimum distribution before April 1, 2020, and for each year thereafter, the required minimum distribution must be made annually by December 31st. If you wait until April 1, 2020 to take your first RMD, you will have to take two distributions in 2020 - one for 2019 and one for 2020. This bunching on income could negatively impact your income taxes. If so, you may want to take your first distribution before December 31, 2019.
  6. Consider a Roth IRA conversion- If you have a traditional individual retirement account (IRA), think about whether you might benefit from converting some or all of it to a Roth IRA. Roth IRAs are not subject to RMDs so you can let the entire balance grow tax-free. The deadline to convert is December 31st.
  7. Make gifts- The annual gift tax exclusion does not carry over from year to year, so gifts must be made by December 31st. The TCJA kept the estate tax rate at 40%, but it more than doubled the exemption base amount from $5,490,000 in 2017 to $11,400,000 in 2019 for individuals ($22.8 million for married couples filing joint return). The annual $15,000 gift tax exclusion amount ($30,000 for married couples) allows you to gift to anyone without dipping into your lifetime gift and estate tax exemption.

Need guidance on your year-end tax planning? We can help.

The TCJA…So Many Changes, So Many Questions…we can help you navigate this huge tax overhaul! Visit our Tax Reform Center for everything you and your business need to know, now.

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