The article below is up to date based on the latest tax laws. It is accurate for your 2019 taxes (filed in 2020) and 2018 taxes, which should be filed by the April 15th, 2019 (or October 15th, 2019 with filed extension) deadline.
October is Financial Planning Month, and what better way to plan than to take a look at your taxes! You thought you didn’t have to do that until January, right? Not true because now is the time to do everything you can to reduce your taxes. Here are a few tax planning steps that you can take now to help you with your 2019 taxes (the ones you file in 2020) and finances:
Give away things you don’t need
If you missed cleaning out your closet or donating throughout the year, now is a great time to shuffle and sort your clothes and give things you don’t need or want to charity. The benefits of doing this include: you may be able to get a tax deduction if you can itemize your deductions, you’ll have more space in your closet, and others can use the items you’ve been neglecting. TurboTax ItsDeductible can help you track and value your charitable donations year-round.
Contribute as much as you can to retirement plans.
One of the best ways to benefit financially is to stock money away for your future in a retirement account and garner tax savings at the same time. If your employer matches your contributions, that’s even better. If you have a plan at work, the money comes straight out of your paycheck so you don’t even have to think about it. You can contribute up to $19,000 ($18,500 for 2018) and an additional $6,000 if you’re 50 or older to an employer-provided retirement account and $6,000 ($5,500 for 2018) and an additional $1,000 if you’re 50 or older to an IRA.
Get an education and a tax credit
If you are paying for post-high school education for yourself and/or your child, you may be eligible for the American Opportunity Tax Credit or the Lifetime Learning Credit. If you or your dependent are attending college next year, you can pay for the first quarter tuition before the end of this year and reap the benefits of the education credits on your 2019 taxes.
Accelerate tax deductions.
Did you receive an unexpected bonus this year that moved you into a higher tax bracket? You may want to move some of your tax-deductible expenses from next year to this year to lower your taxable income and tax bracket if you itemize your tax deductions. You can pay the second half of your 2019 property taxes as long as they were assessed for 2019, pay your January mortgage payment in December, make donations this year instead of next, and make and pay for those doctor’s visits.
Also, be aware that the standard deduction increased under the tax law changes, so if you once itemized your tax deductions and were able to claim things like charitable contributions, you may now have to take the standard deduction. However, you can possibly boost your tax deductions using the tips above allowing you to still itemize.
Don’t worry about knowing these tax rules. TurboTax asks you simple questions about you and gives you the tax deductions and credits you’re eligible for based on your answers. If you have questions, you can connect live via one-way video to a TurboTax Live CPA or Enrolled Agent to get your tax questions answered. TurboTax Live CPAs and Enrolled Agents are available in English and Spanish and can also review, sign, and file your tax return.
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