PB Law Blog... Trusts and Stuff

Tuesday, March 5, 2019

Tax Savings Strategies to Implement NOW to Lower Your 2019 Tax Bill

 The TCJA (Tax Cuts and Jobs Act) virtually doubled the standard deduction (for personal returns).  For 2019, the standard personal deductions are:

  • $12,200 – Single (or married filing separately)
  • $24,400 – Married, filing jointly
  • $18,350 – Head of Household

You can find info for 2018 here.  If you’re used to itemizing your deductions- the new rules may be a game changer.  If your total itemized deductions for this year will come close to the standard deduction, you might want to make some key financial decisions to bump up the deductions to above the standard deduction amount.  This way, this year’s tax bill will be lower (then you may choose to use the standard deduction for the following year).

Options to take advantage of to increase your itemized deductions:

  • Prepay your January (2020) house payment (you can then claim 13 months of interest for tax year 2019).
  • Prepay state/local property &/or income taxes (that are due early 2020).A couple of caveats on this one:
    • Your SALT (state and local taxes) deductions are capped at $10K (married) or $5K (single);
    • Be careful if you owe AMT (alternative minimum tax for this year- SALT write-offs are completely disallowed per the AMT guidelines).Thankfully, the TCJA offers some relief- more info here.
  • Give more to charities! If needed, you can always even this out by giving a bit less next year, if you’re going to fall under the standard deduction.
    • Also, consider giving to charities directly out of your IRA (if you’re 70 ½ or over by the end of the year).You can reallocate your taxable RMDs (required minimum distributions) with tax-free donations to charities.
  • Need pricey surgery or dental work? In 2019, you can deduct medical expenses if they are more than 10% of your AGI (adjusted gross income), if you itemize your deductions.

Mortgage Interest:  Because the standard deductions are so much higher, if you’re no longer itemizing, you may not be getting any tax savings from deducting your mortgage interest.  Thus, it might be wise to pay your mortgage down more aggressively than you have in the past, resulting in interest savings (and increased equity in your home!).

SALT-y States:  Though radical, & difficult for many, if you life in a high tax state such as California or New York, you may want to look into moving to a lower-tax state (such as Nevada!). This trend that is continuing to increase-  Since your SALT taxes are capped, you may see a significant increase in your tax bill.  Moving to a lower-tax state will help not only with tax savings, but with overall cost of living (as most of the time, real estate & other costs are lower overall). 

Check your Withholding:  It’s incredibly important to take a second look at your tax withholding post-TCJA.  The IRS offers this handy calculator.

For more information & guidance, check out the IRS guide, “Tax Reform Basics for Individuals and Families”.  

Happy Tax Planning!  For more ideas, or to discuss your overall planning, please contact us!

-by  Tiffany Ballenger Floyd, Esq. (Nevada & California Estate Planning Attorney), © 2019, Phillips Ballenger, PLLC

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