With 2020 coming to an end, now is the time to maximize your individual tax savings. Here are some ideas for individual taxpayers to cut down your tax bill come April 2020.
For 2019, the standard deduction is $12,200 if you file individually or $24,400 if you file jointly. If your itemized deductions for 2019 approach that number, consider making expenses before the year ends for your itemized deduction to exceed your standard deduction. Prepaying certain expenses now will lower your tax burden. And with inflation, the standard deduction will likely rise next year and you can claim it then.
A few items you can prepay now—mortgage interest, state and local property taxes, healthcare expenses.
Manage Gains and Losses
If you have taxable brokerage accounts with holdings of more than 12 months there may be advantages to selling now. You can offset the tax burden on selling winning stocks by also selling those which did not perform as well. And if you have more losses than gains? Any net capital losses can be carried forward to next year.
Cash gifts to most charities are tax-deductible and can help bump your itemized deductions higher than the standard deductions (as discussed above). Additionally, you can gift shares of stocks to your favorite charities if that makes more financial sense.
Gifts to Relatives
Fund a 529 plan for your children or grandchildren. Alternatively, you can gift up to $15,000 to an individual in a year without reporting it to the IRS.
For more tips on how to maximize your individual tax savings and for a free consultation for your business, contact our team today.