Foresight is 2020: Year-End Tax Planning and Beyond
It can be challenging to think through all the tax planning you need to do by the end of the year. There’s a lot to consider, and although it may seem early to think about taxes, now is the perfect time to make changes for tax filing after the new year. I always tell my clients, call me well before the new year, so we have time to plan ahead. After the new year, there’s nothing you can do about last year’s taxes.
One of the strategies our clients find most helpful are bunching deductions. Essentially, that means accelerating your write-offs into one year to try to get above the standard deduction. That was a challenge for many people last year since it was the first time for all of us filing under the Tax Cuts and Jobs Act of 2017, but this year the only change is a slightly increased standard deduction over last year - $24,400 for Married Filing Jointly, and $12,200 if you’re single. And, by bunching charitable gifts, medical expenses, or even your state and local taxes into one year, you may be able to realize significant savings. Just keep in mind real estate and state and local taxes are still capped at $10,000.
Another useful strategy is what’s call the Backdoor Roth. Essentially, this is a way for people with high incomes to sidestep the Roth’s income limits. Basically, you fund a traditional IRA and then convert it. That’s good news because it then allows your money to grow tax-free. But, it can be complicated, so it’s best to consult with a professional. There’s also some important planning that can be done around charitable giving as well.
You can use a strategy called a Qualified Charitable Deduction, or QCD, provided certain rules are met, and that the gift doesn’t exceed $100,000. In addition to the tax benefit of a charitable gift, a QCD also excludes the amount donated from your taxable income. Keeping your taxable income lower may reduce your impact to certain tax credits and deductions, including Social Security and Medicare.
And, speaking of charitable gifts, it may be better to gift appreciated securities. That means even if you only paid $10,000 for a security, and it’s now valued at $20,000, you can write off the whole $20,000.
These are just a few of many year-end tax planning tips. Now is the time to make tax planning decisions for this year and next, and everyone can benefit from a Financial Quarterback. If you have questions, give us a call at 216.520.1711 or join us at Lineweaver.net to make your no-obligation appointment today.
Securities offered through Triad Advisors, LLC, member FINRA/SIPC. Advisory services offered through Lineweaver Wealth Advisors, LLC. Lineweaver Wealth Advisors, LLC is not affiliated with Triad Advisors, LLC. Information contained herein is not tax advice and should not be considered as such. Each individual’s tax situation is unique and different. For advice related to your specific tax situation, please contact your personal tax professional.
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Case studies are intended to illustrate the types of financial issues faced by actual clients. They should not be construed as a testimonial for or endorsement of Lineweaver Wealth Advisors. They do not represent the experience of any advisory client. Each client’s situation is different, and their goals may not always be achieved. Lineweaver Wealth Advisors, LLC, is not engaged in the practice of law or accounting. Tax information provided is general in nature and should not be construed as legal or tax advice. Always consult an attorney or tax professional regarding your specific legal or tax situation. Tax rules and regulations are subject to change at any time.
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