You might have a Christmas to-do list to help you stay on track this holiday season. And while it may be an overwhelming list already, there are a few important financial deadlines you should add to it. It’s the season of giving, so don’t forget to give yourself the gift of tax planning. What you do before the end of the year might be more important than what you do between January and April 15th. These are 4 important things to do by December 31st if you want to save on taxes for 2019.
If you itemize your deductions, you can deduct charitable donations. In order to take a deduction, you must donate cash or property to a qualified tax-exempt organization. Make sure to document your contributions and get a record of your donation from the charity. As long as the postmark on your envelope or the charge on your credit card is before midnight December 31st, your donation will count for the 2019 tax year.
IRA contributions aren’t due until April 15th, but 401(k) contributions for the 2019 tax year must be made by December 31st. You can contribute up to $19,000 to a 401(k) in 2019 and can contribute an additional $6,000 if you are 50 or older. That could mean a total of $25,000! If you have to take a Required Minimum Distribution from your 401(k) or IRA, don’t forget to take RMDs by December 31st.
You can gift up to $15,000 per person in 2019, and a total of up to $11.58 million over your lifetime, tax-free. This can be a way to pass on wealth during your lifetime and reduce your taxable estate. Note that gift checks must be deposited before December 31st for the gift to count for the 2019 tax year, so make sure to remind any lucky recipients.
If you’re considering converting some or all of your savings in a pre-tax retirement account to a Roth, you must do so by December 31st. While this won’t help you save on taxes for 2019, it could potentially reduce your tax burden later in retirement. After you pay tax on the amount you are converting, it will grow tax-free in the Roth account and can be withdrawn tax-free. Keep in mind that Roth conversions are now irreversible.
The professionals at O’Donnell Financial Group can help you find ways to lower your taxes for 2019, as well as for all future years. Taxes could be your biggest expense in retirement and planning in advance can have a major impact. If you’re interested in learning more about tax minimization strategies, click here to sign up for a complimentary financial review.