You are past all the tax filing deadlines for 2018, so now it’s really time to focus on your taxes for 2019. If you haven’t already thought about your taxes for the current year, you have less than two months left to make a difference for your 2019 taxes. These three tips can help make your taxes a little more manageable come April.
Income is taxed in the year it is received—but why pay tax today if you can pay it tomorrow instead?
It sometimes makes sense to accelerate deductions and defer income. If you are self-employed, consider invoicing your clients in January 2020 instead of December 2019 to defer income to next year. . On the deduction side, are you thinking of buying furniture or computers to start off the new year? You may be able to prepay some expenses in December to accelerate spending in the current year.
2. Contribute the maximum to retirement accounts
There may be no better investment than tax-deferred retirement accounts. They can grow to a substantial sum because they compound over time free of taxes.
Company-sponsored 401(k) plans may be the best deal because employers often match contributions.
Increase your 401(k) contribution so that you are putting in the maximum amount of money allowed ($19,000 for 2019, $25,000 if you are age 50 or over). If you can’t afford that much, try to contribute at least the amount that will be matched by employer contributions.
The Tax Cuts and Job Act of 2017 doubled the standard deduction. So, if you cannot take your charitable donations as a tax deduction any more, there may be a solution for you. Consider opening a donor-advised fund to donate your money to. You can bunch your donations in one year, take the charitable donation as a deduction on your tax return for that year and use those funds to make contributions to various organizations in subsequent years.
These tips are just a sample of the ways you can prepare for tax season. You can get significant tax savings with proper planning. Talk to your CPA today and plan ahead!