Give yourself the gift of paying less on your 2019 taxes. You’ve still got time to make sure you don’t pay the IRS more than you have to.
In the heat of the holiday bustle, it’s easy to forget that the deadline to make last-minute tax deductions is upon us. Here are six smart ways to reduce your 2019 taxable income before the clock strikes midnight on Dec. 31:
1. Contribute to Your Employer Retirement Plan
There is still time to tell your employer to increase your last contribution to your 401(k), 403(b), 457(b) or whichever workplace retirement plan you’ve been using. The maximum contribution limit for these types of employer-sponsored retirement plans for 2019 is $19,000 if you’re under age 50. Those 50 or older can contribute up to $25,000 due to their eligibility to make a $6,000 catch-up contribution. Don’t sweat it if you contribute to a traditional IRA or Roth IRA, you have until the date that you file your tax return (April 15, 2020) to make contributions for the 2019 tax year.
MORE FROM HERMONEY: Grab your calendar and mark these important deadlines so you don’t miss a single tax move!
2. Add to Your Health Savings Account
Your health savings account (HSA) is another account that you can make a year-end contribution. An individual can contribute up to $3,500 per year; having family coverage means that you can contribute up to $7,000. A catch-up contribution of $1,000 for those age 55 or older gives your HSA a little additional padding. One big head’s up: These maximums include any employer contributions, so make sure that you don’t go over allowable amounts. While some employers may allow HSA contributions up until April 15 of the following year, to be on the safe side, bump up that last contribution before the end of 2019.
3. Give to Charity
You can still text, charge, or snail mail charitable contributions up to and including December 31. In fact, if you write a check, the IRS uses the date you put the check in the mail as the official contribution date. If you’ve already set up a donor-advised fund (DAF) — here’s the lowdown on this handy giving tool — consider making one last contribution before ringing in the new year. Remember that you can donate more than cash to your DAF. Appreciated stock and real estate are eligible, too.
4. Lump and Clump Other Deductions
Lumping and clumping — bunching together a bunch of deductions into a single year to make it easier and more lucrative to itemize — is an effective way to get the most out of your 2019 deductions. Try to squeeze in one additional mortgage payment, charitable contribution or other items you’re allowed to itemize.
MORE FROM HERMONEY: How to lump and clump your way to save more on your 2019 taxes.
5. Employ Tax Loss Harvesting
While this year has been overall a good year in the stock markets, not every investment has gone up. Review the holdings in your taxable investment accounts to determine if you can take any losses. Realizing losses, or tax loss harvesting, means that you’re selling a security at a loss to offset capital gains of up to $3,000 of ordinary income reported on your tax return. Any losses that remain can be carried forward. Take note that if you really liked the security that you were selling, you need to wait 31 days before buying back that security. Otherwise, not only can you not take that loss, but that loss will be added to the purchase price of the security that you bought back. Confusing? Just wait the 31 days.
6. Contribute to 529 Accounts
If you’re looking for a deduction to your state taxable income, make a contribution to a 529 college savings plan. Check with your specific 529 account’s custodian to find out the last date that they are accepting 2019 contributions. There are 10 states that allow you to make 2019 contributions in early 2020. Note deductible amounts vary by state.
While you’ve no doubt been gifting to others this holiday season, take some of these steps before year-end and give yourself the gift of paying less at tax time.
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