Calling All Taxpayers

Procrastination is easy, especially when it comes to summertime tax planning. But

waiting to implement strategies to reduce your 2019 tax obligations could cost you

money. Here are some suggestions to help jump start your midyear review:

Adjust your withholdings and estimated payments

If you haven’t already, update your withholdings and estimated tax payments

to reflect any changes needed since last year. Updates may be in order if

you experience a big life event, such as marriage, divorce or a new job.

Overpaying your 2019 tax reduces the cash you have on hand throughout

the year, and underpaying can lead to penalties and interest.

Save more for retirement

When inflation adjustments kicked in at the beginning of the year, did you boost

your retirement plan contributions? If not, you still have time to increase your

contributions over the remainder of 2019. Contributions to your 401(k) are made

on a pre-tax basis, which means they’re not included in your gross income. Taking

advantage of this benefit can reduce your taxable income. For 2019, you can deposit up to $19,000 in your 401(k) and $6,000 into your IRA (additional catch-up contributions apply if you’re 50 or older). You can contribute to both a 401(k) and an IRA, though tax deductibility on IRA contributions may be limited, depending on your income.

Deploy a gift-giving strategy

It’s time to work on your 2019 gifting plan if you haven’t started yet. As you plan,

remember that the annual exclusion lets you make gifts up to $15,000 in 2019 to

any number of individuals without having to pay gift tax or file a gift tax return.

If you decide to gift money to a child or grandchild for education expenses,

the $15,000-per-person annual gift limitation does not apply if a payment is

made directly to a qualifying educational institution. Not only are gift tax limitations

removed, making substantial education payments in this manner could also

reduce your taxable estate — ultimately reducing your exposure to estate taxes.

Don’t forget that your direct education gift can be for a grandchild, niece, nephew or

anybody else of any age, either related or unrelated.

Consider the new kiddie tax rules

If your school-aged child works, recent changes to how their unearned income

is taxed may mean you’ll be dealing with higher tax rates. The tax is now based on

the rates for estates and trusts instead of parents’ top tax rate. So your child’s

unearned income tax rate gets much higher much sooner than in prior years

when it could be taxed at parents’ lower rates. The best way to avoid a higher tax rate is

to manage your child’s unearned income at or below $2,200 for 2019.

Be tax-savvy about school savings

Are you currently setting aside money in a taxable account to pay for your child’s

school expenses? You could realize tax savings by opening a 529 education

savings account instead. The sooner you do, the sooner earnings will grow

tax-deferred. They will also generally be tax-free when withdrawals are used for

qualified education expenses.

Conduct an annual estate plan review

The estate tax is still alive and well,so as part of your midyear review you

should update your will and other estate documents. Remember that the federal

estate tax applies to fewer people now, with the exemption at $11.4 million per


Safeguard your deductions

Too often people are surprised when the IRS reduces their deductions. Don’t let

this happen to you. You can work to ensure you can take deductions by keeping great

records throughout the year. You’ll need proof if you want tax breaks for things like

charitable contributions, gambling losses, vehicle costs and travel expenses. If you

neglected to track these expenses at the beginning of the year, get going now. There’s still enough time to make tax changes that matter. Call today for help keeping your tax outlook as positive as possible.

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