End of Year Tax-Planning Reminders

November 7, 2019

2019 has flown by and we are quickly approaching the holiday season. It is also year-end tax planning season and we are here to help! Please don’t hesitate to reach out to brainstorm ideas specific to your situation. Here are a few ideas as food for thought:

Business Owners

Purchase new equipment or a vehicle – depreciation rules are still very favorable for 2019 and allow business owners a number of options to write off equipment. One key consideration is the equipment must be “placed in service” prior to year-end. That means it must be received and in use, not just on order.

Review your current retirement plan and evaluate your needs for 2019 and 2020. 

Maximize your discretionary business expense opportunities and get a reimbursement from the business. Things like auto expense, networking meals, cell phone, home internet, home office, and paying family members are all worth consideration.

Bonuses to employees – the IRS requires that all cash or cash equivalent employee gifts be added to their W-2. Unfortunately, this includes gift cards. Non-cash gifts valued at $75 or less are not taxable.

Holiday parties – unlike regular business meals, holiday parties for your company can be 100% tax deductible.  

Stock up on office and medical supplies used routinely in your business. 

Research and development credits – for those business innovating processes and technologies, it is worth exploring opportunities in this area.

Cost segregation studies – for those businesses with a new building or expansion space, this tool can yield great tax results by accelerating depreciation deductions. 

Individuals & Families

Payment of home property taxes before year-end to get the deduction in 2019.

Charitable giving strategies – there are some great tools for consideration:

  • Usage of donor advised funds to make large donations to get the full benefit in 2019 and then disburse the money out over any number of years beyond 2019. Learn more.
  • Donation of highly appreciated stocks or mutual funds held longer than 12 months. Learn more.
  • “Non-cash” gifts to organizations such as Goodwill. It is a great time to clean out your closets and get a tax deduction too. 

Loss harvesting in your investment portfolio for tax purposes. 

Fully fund your Health Savings Account for 2019.

Do a “back door” Roth conversion – while Roth IRA contributions are not tax deductible, the account grows tax-free – which means you pay no taxes on qualified Roth distributions during retirement. However, most high income taxpayers are not eligible to contribute to a Roth. This is where the “backdoor” Roth contribution comes into play. The backdoor Roth strategy allows you to put money into a Roth IRA even when you are over the income threshold for making direct Roth contributions.  Learn more.

Gifting to family members for estate planning – while it does not reduce income taxes, gifting is still commonly used as an estate planning tool. The gift exclusion for 2019 remains at $15,000 per person. 

2020 Tax Changes

At this point, there is no substantial movement on tax legislation changes. All eyes are on the election in 2020 and what changes it will bring with tax policy. As always, we are vigilantly watching this and looking for opportunities for our clients.