After the hustle and bustle of the holiday season, taxes may be the last thing on your mind. However, there are many steps you can take now that the holidays have come to a close to prepare yourself for tax season. At Davie Kaplan, we take tax planning in Rochester, NY very seriously, that’s why we compiled a list of things you should be doing now to be prepared.
The Gift of Money
Even though the holidays are over, it’s not too late to give back! Giving can be done all year round. According to Federal tax laws, an individual is legally allowed to gift up to $15,000 without reporting the gift to the I.R.S. This is per individual, meaning a couple could gift up to $30,000 during the tax year to the same recipient. There is no dollar limit to paying for another individual’s medical or educational expenses. What happens if you want to gift more than $15,000? You must file an IRS 709 form during the following tax season. However, there is a catch: If you want to pay more than your yearly $15,000 limit, you can deduct the extra from your lifetime gift limit of $11.58 million in 2020. That means if you gift $100,000 to one individual, $85,000 is deducted from your lifetime gift allowance.
Our Rochester CPAs at Davie Kaplan recommend giving back with charitable donations. If you’re looking for a positive way to start the new year off right, now is the perfect time to give a little to a charitable cause. The IRS has rules as to what it considers a charitable organization so be sure to check beforehand if the charity you choose qualifies. What are the benefits of donating your money? There are plenty of reasons we recommended making a charitable donation. Your donations can be tax-deductible in 2020, making this a tax benefit you should take advantage of. Donations can include more than just cash donations. The IRS also allows for items such as clothing, old furniture, and other goods to be donated that are in “good condition.” If you donate often or in large quantities to places like Salvation Army or Goodwill, make sure to get a receipt or proof of donation so you can submit it on your tax returns as a tax deduction. Due to the increased standard deduction, talk to us about a strategy of “bunching” your donations every other year.
Maximize Retirement Accounts
Maximizing your retirement accounts is not only great for having more money in a retirement account and getting employer matching benefits, your contributions are also tax-deductible. An individual under the age of 50 can contribute $19,500 to a 401K plan. By raising your contribution to your retirement plan, you will be able to save a substantial amount on your next tax return. Retirement savings is a great investment in yourself.
It’s important to take steps now to prepare for the next tax season, which will be here before we know it! At Davie Kaplan, we understand how confusing taxes can be, that’s why we have a dedicated team of experts here to help you every step of the way. If you have questions or are looking for tax services in Rochester NY, we have a team for you. Please feel free to contact us with any questions, comments or concerns you have.