Year-end Tax Saving Tips

money-2696234_1920

2019 is about to end. However, there is still time to implement some tax saving strategies. Below are some year-end tax saving tips.

Max out on your retirement plan

Make contributions to your 401(k) before December 31. If your work offers 401(k), its usually a good idea to take advantage of it. If you haven't maxed out on it, you have until December 31 to make the contribution.

Contribute to HSA. If you have a qualified high-deductible family insurance plan, you could contribute $7,000 to health savings account. Deadline to make contribution to health savings account is December 31.

There is still time for IRA contribution but don't delay it. You can contribute up to $6,000 to a traditional or Roth IRA account. Deadline to make contribution for 2019 is April 15th 2020.

More info can be found here.

Take advantage of saver's credit (up to $2,000)

If your income is less than $64,000 (married filing jointly), you can qualify to get tax credit of up to 50% of your contributions. The maximum contribution amount that may qualify for the credit is $2,000 ($4,000 if married filing jointly), making the maximum credit $1,000 ($2,000 if married filing jointly). You can contribute to an IRA account until April 15, 2020 to claim the credit in 2019 tax return. Most credit unions and banks offer free IRA accounts. Below table shows how much credit you can get based on your income.

SaversCredit

Take capital losses

If you own stocks that have a unrealized loss, it might be best to realize the loss for tax deduction. You can only deduct $3,000 in capital loss on your federal taxes. Loss over $3,000 is carried over to future years. If you do sell stocks for a loss, you can't buy the same or substantially identity stock again for 30 days.

Pickup capital gains (if your income is low)

If you are a married couple filing jointly and your total taxable income is below $78,750, you won't have to pay any long term capital gain. So if you have stocks with long term capital gain, you can realize the gain and not pay any tax on it. Before realizing any gains make sure your total taxable income for 2019 including the gain on stocks sold is less than $78,750 (if married filing jointly).

Read more.

Contribute to a charity

Donate to a charity before the end of the year to take deduction in 2019 taxes. Charitable contributions is an itemized deduction so you can only take deduction if you total itemized deductions are over $24,400 for married filing jointly. If you have charitable contributions spread over few years, it might be better to combine them into one year to maximize the deduction.

If you have stocks with built-in gain, you can donate them without having to pay capital gain on the stock appreciation and if you held the stock for longer than a year then you can deduct the higher market value of the stocks as charitable contributions.

More info can be found on IRS website.