Time is running out! Do you want a lower tax bill for 2019? Here are steps you can take in Flower Mound TX to lower your tax liability before the year is over.
1. Check Your Withholding
By taking advantage of online tax withholding calculators, you can determine what taxes may be able to be withheld from your paycheck before the end of the year, and maybe avoid a surprise come April.
2. Pay Your Bills Now
You’ll likely already have a good idea whether you’ll itemize or claim the standard deduction when you file your tax return. If you’re going to itemize, it’s a good idea to pay any deductible expenses like mortgage payments and state taxes now.
3. Consider a Roth Conversion
Convert some money from your IRA to a Roth IRA to help your money grow tax-free (after some initial conversion taxes). You can spread the conversions over a few years, although if you convert your entire IRA balance you could be bumped to a higher tax rate.
4. Make the Most of the Tax Harvest
You can sell investments that have fallen below their purchase cost and use that loss to offset capital gains in taxable accounts. Any investments held for up to a year are taxed as regular income, while longer held investments are taxed at the long-term capital gains rate.
5. Keep an Eye Out for Capital Gains Distributions
Mutual funds need to pay their shareholders any gains made during the year from the sale of stocks or bonds. You must pay taxes on these at the time of filing your tax return if you own the fund in a taxable account, even if you plan to reinvest them.
6. Max Out your Pre-Tax Retirement Savings
There may be a chance for you to squeeze out some additional money for your retirement savings from each paycheck as the year comes to an end. As much as $19,000 can be contributed to a 401(k), 403(b) or federal Thrift Savings Plan, plus an additional $6,000 for those over 50.
7. Open a 401(k) to Boost Retirement Savings
By opening a solo 401(k) plan you can contribute any self-employed or freelance income and take a tax deduction. Alternatively, you could open a Simplified Employee Pension account, although these don’t allow for larger contributions like a 401(k) does.
8. Open a Donor-Advised Fund
If you put your money and other assets such as personal property and stocks into a donor-advised fund, you can deduct the entire contribution in the year you make it for a lower tax bill and not have to worry about how you want to share out grants to charities until later.
9. Donate Unneeded Items to Charity
You can boost your itemized deductions by donating any unneeded clothes, furniture, or kitchenware to a charity in Flower Mound TX, all while helping out a good cause. You can base your deduction on the “fair market value” of the item, and there are online tools available to help estimate an item’s value.
10. Transfer IRA Money to Charity
Those 70 and a half or older can transfer as much as $100,000 tax-free from their IRA to charity each year. The transfer could help to keep your income below the Medicare high-income surcharge threshold, while also holding down the taxable percentage of your Social Security benefits.