What You Should Do Now to Prepare for the 2019 Tax Year
As 2018 draws to a close, you’re probably starting to think about filing your taxes in the first few months of 2019. But in reality, this is the best time to start thinking about planning for the 2019 tax year. With most of 2018 gone, there’s very little you can do to impact your upcoming return. However, with all of 2019 laid out ahead of you, it’s the perfect time to map out your tax plan to ensure you get an optimal return for the next tax year. So, here are a few things you should start doing right now to improve your outlook for your 2019 taxes.
Plan Out Retirement Contributions
Many people make a large, last-minute contribution to their retirement accounts in an attempt to reduce their taxable income on their return. And while this is perfectly fine, dumping thousands of dollars into your IRAs isn’t something that everyone can do all at once. Instead, start planning out your 2019 contributions now, so that you can spread out the deposits over the course of the year.
Both traditional and Roth IRAs have a contribution limit of $5,500 (or $6,500 if you’re 50 or older), and it’s a good idea to max out those contributions if you can. So map out your finances and schedule contributions every month. This will allow you to get the maximum tax benefit on your 2019 return without scrambling to find enough liquid assets to make a large, last-minute contribution.
Examine Your Withholdings
This is also a great time to check your withholdings on your paycheck and determine whether you should alter the amount being withheld. Doing it now will help you to examine how your current withholdings impact your upcoming return, allowing you to make a more informed decision on the correct amount to withhold. Of course, you should seek your CPA’s advice on this, as they’ll be able to offer you the expertise needed to optimize your withholdings for the maximum benefit without impacting your lifestyle.
Consider Education Credits
The tax bill that was passed at the end of 2017 and put into effect for the 2018 tax year included some significant changes to the education credits offered by the federal government. There are now two different education credits available for taxpayers: the American Opportunity Credit and the Lifetime Learning Credit.
These two credits have different requirements that must be met if you wish to claim them, and only one can be claimed for each of your dependents (including yourself). So, now is a good time to examine those credits, decide if any of your dependents qualify for them, and choose which credits you’ll claim for which individuals in the 2019 tax year. This sort of planning will enable you to ensure that the credentials for claiming these credits are met, and will help you to get the maximum benefit available from these credits.
Sort Out Your Health Care
The Tax Cuts and Jobs Act of 2017 did away with the penalties associated with not having health insurance, and that repeal will officially go into effect when you file your 2019 taxes. So, that makes right now the perfect time to reexamine your health care options and determine what the best choice is for you and your family. And while the tax implications are far from the only consideration when it comes to health care coverage, it’s still something that you will want to keep in mind.
Additionally, the open enrollment period will end on December 15th, so you need to consider your options and make a decision now if you want coverage in 2019.
Charitable contributions are another tax deduction that people tend to dump into at the end of the year. However, doing this in haste can lead to you donating to organizations or causes that aren’t eligible for tax-deductible contributions. That’s why you should take the time now to investigate the charities and organizations that you might want to contribute to in the coming year. While you don’t necessarily have to plan out your contributions as you should do with your retirement accounts, knowing which charities meet the IRS’s requirements for tax-deductible contributions will ensure that you don’t miss out on these deductions in 2019.
Proper planning can go a long way towards giving you the best possible return for 2019. So, rather than waiting until next year, start planning for the 2019 tax year now, and you could see some significant improvements when you file in 2020.
Camputaro and Associates
Certified Public Accounting Firm
136 N. Orchard Street, Suite 8
Ormond Beach, FL 32174