Year after year there are new changes to tax laws, and 2019 is no exception. With new laws and regulations coming our way, now is the time to start preparing for the upcoming tax season. There is more to preparation than just getting W-2’s and figuring out what needs to be claimed; you can take steps now to save money later. Not sure how? No worries, we’ve compiled a list of steps you need to take now to save you money come April.
Up Your Retirement
Adding money to your retirement is always a good idea, but it’s particularly smart to boost that contribution sooner rather than later for tax purposes. With increased funds in your retirement, you can see your future money accumulate while also lowering your taxable income. The max contribution for most employees participating in a 401(k), 403(b), and most 457 plans changed in 2019 from $18,500 to $19,000. ($24,500 (2018) to $25,000 (2019) for age 50 and over).
Up Your Health Care
Similar to adding money to your retirement, you can also add money to a Health Savings Account (HSA). An HSA acts as a personal savings account but is used for medical expenses. Your max contribution to a HSA is $3,500 per year if you are under 55, and $4,500 per year if you are 55 and older for an individual plan. You can contribute up to the day before filing to receive this deduction!
Fund an educational savings plan
Similar to both the retirement and health care initiative, you can also contribute your income to a 529 education savings plan. While these contributions only have limited state-level current year deduction availability, the amounts in the plan grow tax deferred and will escape taxation if used for education. This plan also allows for one to give a tax-free gift to someone of any age for education purposes and can be up to $15,000 per individual to help fund the account.
Donate to A Cause
Consider a donation to charity. If you are eligible to itemize your deductions, you can deduct donations to your favorite charity and lower your taxable income. You can donate household goods, money, really anything that you can substantiate the fair market value of. And don’t forget to get a receipt for your donations!
There are many ways you can decrease your taxable income and save money come tax season in 2020. It’s important to take into consideration your money and how you can disperse it appropriately to the things that matter most to you.
Tax season 2020 will be here before you know it. If you are in the Rochester area and are interested in meeting with a CPA to discuss our tax preparation services and individualized steps you can take to save money next tax season, Davie Kaplan is here to help! Contact a representative today here.