Top 10 Tax Refund Takeaways From 2019

As winters approach, taxpayers across the country have even less time to plan for their taxes. In no time Spring will be looming and you do not want to be caught in the crosswinds. This festival season, you can set aside some of your time and plan for your taxes, if you haven’t already done this. It is to ensure that your tax liability is low and that you have a better chance at a higher tax refund. Here are the top 10 takeaways considering the proposed changes in taxes in 2019.

1.401(k) and HSA

You can contribute towards traditional IRAs up to the 15th of April of next year. However, you will miss out on the provisions for 401(k) and Health Savings Account if you do not make any contributions till the 31st of December. Taxpayers can deductions up to $7,000 for contributions towards health insurance plans.

2.Delay Your Mutual Fund Purchase

If you wish to buy mutual funds during this time of the year, you might want to rethink the decision. Especially if you want to hold them in a taxable account. The problem with buying at this time is that you would have to pay taxes on the year end dividends. This is applicable even if you just purchased the shares.

3.Capital Loss Harvesting

Should you own any stocks that are at a loss, you can sell them and deduct up to $3,000 on the federal taxes that you owe. The only thing that you need to be careful about is that you do not violate the wash-sale rule. According to the rule, you cannot purchase the exact same stock or something substantially similar within 30 days of selling the stocks.

4.Opportunity Funds

You have the option to defer paying capital gains tax if you choose to reinvest in Qualified Opportunity Funds. The Tax Cuts and Jobs Act of 2017 brought the Opportunity Funds into existence. The fund aims at creating jobs and opportunities in communities that are distressed.

5.Charity

On reaching the age of 70 ½ years, senior citizens must take minimum distribution if they have 401(k) or IRA. If you do not need the amount for living, you can send it to a charity. Essentially it is a check issued by the IRA to the charity.

6.Traditional To Roth IRA

Any amount that you withdraw on retirement from a traditional IRAs taxable but any distribution from Roth IRA is fax-free. Roth IRAs also do not have minimum requirements, which can be beneficial to reduce your taxes. You can convert your traditional IRA to Roth IRA, but you need to be cognizant of the fact that the converted amount can be taxed.

7.Opt For Capital Gains Tax

If you belong to the 10% or 12% tax bracket, you can consider selling your stocks that are in green. You can sell stocks that have seen significant appreciation as you do not have to pay any capital gain taxes for the mentioned brackets.

8.Charity

You can club your charitable contributions together for more effective tax planning. You can club your contributions for two years and file in a single year. This will allow you to claim itemized deductions for alternate years.

9.Flexible Spending Account

You cannot carry forward any balance that is in a flexible spending account. It might be a good idea to put the amount to use before it expires.

10.Tax Advisor Services

To maximize your tax refunds, reaching out to tax advisor might be a good idea. And the earlier you meet, the better chances you have of getting a good advisor and good refunds.

Knowing the basics of taxation and ways to reduce liability is helpful in the long run and something that all tax payers must be aware of.

Reference:

https://money.usnews.com/money/personal-finance/taxes/articles/10-year-end-tax-tips