Your 2019 Taxes 4 Things to Do Right Now

Remember when taxes were something you began worrying about on April 1^st?

The good ol’ days.

That’s okay. As the tax code has changed, you simply have to adapt and change with it.

While by no means comprehensive—there’s a lot more to consider than can be listed here—if you want to contain your tax bill next April (or increase the size of your refund), here are four things you should do.

1) Re-evaluate Your Itemized Deductions

In light of February’s “Tax Cuts and Jobs Act,” standard deductions went up, while your options regarding itemized deductions went down (or away).

The new tax law capped or eliminated many itemized deductions. For instance, you’re now limited to $10,000 on the state or local taxes you’re allowed to claim, and many itemized sacred cows, such as certain costs associated with investing, have also been erased.

What should you do?

Take a look at last year’s Schedule A, and if you had a lot of itemized deductions, call your accountant right now to come up with a plan. There are coping mechanisms, but with just three months left in the year, you need to act fast.

2) Review How Much Your Investments Cost

Readers of our articles know that we often remind you that one of the major differences between advisors is their differing fee structures.

Sure, it’s about basic costs and how much they charge. But it’s also about their motivations.

Before the recent changes to our tax laws, you could write off investment, trust and custodial fees.

No more.

Since you can no longer write these off, you need to make absolutely certain you’re working with a fee-based advisor who should have no motivation to make any recommendations except those that are in your best interests. That’s because commission-based advisors may not only be recommending investments for no other reason than that’s how they get paid, they may be moving your money in and out of investments merely to rack up fees on the transactions.

What should you do?

First, re-visit how much you’re being charged by your advisor.

Second, if you have an IRA—and many years remain before you’ll need the savings—use money outside your IRA (rather than inside) to pay the management fees. If your IRA is growing, you want those tax-deferred savings protected for as long as possible. (The circumstances would likely be reversed if you’re set to retire and use the money soon.)

3) Create a New Giving Strategy

Supporting a preferred charity is something that’s near and dear to my heart. There’s nothing better. And for as long as I can remember, the bonus to charitable giving was being able to write those donations off.

But under the new tax law, claiming the deduction is more complex than in the past. You can still claim it, but with the standard deduction having basically doubled (to $12,000) under the Tax Cuts and Jobs Act, you have to itemize, and so it’s a much higher threshold to clear.

In short, you now have to accrue over $12,000 (as an individual filer) in total itemized deductions to realize a tax benefit from your charitable contributions.

What should you do?

Take the charitable giving you’ve typically done every year, and, instead, add it together and make that contribution every other year.

This is called “bunching.” This way, one year you claim your itemized deductions, and the next year you utilize the standard deduction.

If you’re over 70½, when it comes to retirement accounts and required minimum distributions, you can potentially donate in a tax-friendly way when you transfer the money from your IRA to a legitimate charity.

4) Are You Claiming Too Many Allowances?

When it comes to taxes and the amount of money you have withheld from your paycheck, 2019 ushers in a whole new ballgame, as well.

In the past, it could be a good call to err on the side of maximizing your take-home pay by withholding a little less than you needed to. (This was because, when it came to deductions, you had more options.)

But now that the standard deduction has jumped to $12,000 for singles, and $24,000 for married couples who file together, under-withholding could cost you.

What should you do?

Review your allowances today.

If you typically get a small refund, and you haven’t adjusted your allowances from last year (remember, itemized deductions have changed), talk to your accountant. Ask her if you should increase the amount that’s withheld from your paycheck.

*Remember, you can have additional money withheld without changing your allowances. Just stipulate that you want an additional $100, $200, or $300, etc., withheld each pay cycle.

Conclusion

While I’m not an accountant, we understand the importance of timely tax advice and information. When it comes to your tax planning, always consult a certified accountant before making any decisions.