Financial planning often revolves around saving for the future, particularly retirement. But anticipating taxes, and strategizing to minimize their impact, is another important component of both short- and long-term planning.
Before the end of the year, consider the following steps to potentially reduce your overall federal income tax debt for 2019. Of course, these ideas are only meant to provide a jumping-off point for conversations that you should be having with your tax professional or financial advisor.
- Make January’s mortgage payment early- mortgage interest is deductible, and if you make an extra payment every year you could pay off your mortgage several years early
- Donate to charity – the charitable contributions deduction can reduce your taxable income, if you choose a charity qualified by the IRS
- Contribute to your health savings account, if you have one – individuals can contribute up to $3,500, while those with a family plan can stash $7,000 and lower their taxable income for the year
- Pay your medical bills – qualifying medical expenses that exceed 10 percent of your AGI are deductible on your federal income tax return
- Pay property taxes – these are also deductible, up to $10,000, but only on properties that have been assessed (meaning you have received the bill)
- Circumvent future estate taxes by passing on money now- if you’re concerned about the estate tax burden upon your loved ones after your death, you can gift up to $15,000 per person each year
- Strategize with investment losses – rather than holding onto a losing investment, it might make sense to sell it at a loss to offset capital gains
- Max out your TSP contributions – for 2019, you can contribute up to $19,000, or $25,000 if you’re age 50 or older
- Take your required minimum distribution from your TSP, if you’ve reached age 70 1/2 – if you haven’t taken your RMD by the end of the year, you could be subject to a penalty of 50 percent of the amount you should have withdrawn
If you have questions about any of these items, or other financial planning topics, please call us to schedule an appointment. We should examine your situation in detail before you make any permanent decisions.
