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Effective Tax Planning Starts Now

9/5/2019

Take a proactive approach to your tax planning and get started in the summer. 415 Group Director Todd Ruggles, CPA, explains why starting now will help lessen any surprises when the next tax season rolls around.

Many people only consider tax planning at the end of the calendar year. However, you should consider a year-round approach. If you look into it in the summer, you can take better advantage of different tax code opportunities by giving yourself more time to make adjustments.

Listed below are ideas for midyear tax planning. These are great conversation starters for you and your CPA. There are many opportunities for individuals, including those offered by your employer. And, if you own a business, look for ideas there as well. With the Tax Cuts and Jobs Act (TCJA), look at how your business is structured to find out if you’re taking advantage of all the new tax deductions.

For your personal tax situation, take some time to go through the ideas below with your CPA. They might have other ideas as well, and they can help you decide which ones would make the most sense to pursue. Taking the time now will help in the long run. For example, people think they should make retirement planning contributions all at once at the end of the year. However, if you plan ahead, you can spread out your IRA contributions throughout the year.

When you work with an advisor at 415 Group, we will take a proactive approach to your tax planning. We do comprehensive tax projections throughout the year so we can lessen any potential surprises and get you the most benefits when it comes time to file your taxes.

Beyond tax code changes and changes out of your control, if you make a change, we want you to keep us in the loop. If you’re contemplating doing something that will impact your overall taxes, we can discuss the impact so you can adequately plan.

If you want to work on a proactive approach to your tax planning, contact an advisor at 415 Group. We can work with you throughout the year to ensure you get the most out of the next tax season.

With summertime activities in full swing, tax planning is probably not on the top of your to-do list. But putting it off creates a problem at the end of the year when there’s little time for changes to take effect. If you take the time to plan now, you’ll have six months for your actions to make a difference on your 2019 tax return. Here are some ideas to get you started.

  1. Know your upcoming tax breaks. Pull out your 2018 tax return and take a look at your income, deductions and credits. Ask yourself whether all these breaks will be available again this year. For example: 
    Are you expecting more income that will bump you to a higher tax rate?
    Will increased income cause a benefit to phase out?
    Will any of your children outgrow a tax credit?
    Any changes to your tax situation will make planning now much more important.
  2. Make tax-wise investment decisions. Have some loser stocks you were hoping would rebound? If the prospects for revival aren’t great, and you’ve owned them for less than one year (short-term), selling them now before they change to long-term stocks can offset up to $3,000 in ordinary income this year. Conversely, appreciated stocks held longer than one year may be candidates for potential charitable contributions or possible choices to optimize your taxes with proper planning.
  3. Adjust your retirement plan contributions. Are you still making contributions based on last year’s limits? Maximum savings amounts increase for retirement plans in 2019. You can contribute up to $13,000 to a SIMPLE IRA, up to $19,000 to a 401(k) and up to $6,000 to a traditional or Roth IRA. Remember to add catch-up contributions if you’ll be 50 by the end of December!
  4. Plan for upcoming college expenses. With the school year around the corner, understanding the various tax breaks for college expenses before you start doling out your cash for post-secondary education will ensure the maximum tax savings. There are two tax credits available, the American Opportunity Tax Credit (AOTC) and the Lifetime Learning Credit. Plus there are tax benefits for student loan interest and Coverdell Savings accounts. Add 529 college savings plans, and you quickly realize an educational tax strategy is best established early in the year.
  5. Add some business to your summer vacation. If you own a business, you might be able to deduct some of your travel expenses as a business expense. To qualify, the primary reason for your trip must be business-related. Keep detailed records of where and when you work, plus get receipts for all ordinary and necessary expenses!
  6. Great tax planning is a year-round process, but it’s especially effective at midyear. Making time now not only helps reduce your taxes, it puts you in control of your entire financial situation.
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