Finish LineApril 10, 2019 -
Categorized in: IAG News
Unless you live in Massachusetts or Maine the federal tax filing finish line falls just 5 days from now on April 15. Either you must file your taxes by April 15 or file an extension which permits you to delay the inevitable until October 15 — as long as you pay what you think you owe now.
In February there was great apprehension because the IRS reported that three weeks into tax filing season tax refunds had plummeted by over 16% compared to last year. National news media fanned these flames for several days, leaving the lasting impression that the new tax law that took effect in 2018 actually raised taxes.
However, as of March 8 the IRS reports that the average refund is actually up by $4 over last year from $3,004 to $3,008. This average refund is on top of the “pre-filing refund” most employees experienced when the IRS reduced tax withholding from their paychecks early last year. An apples to apples comparison of actual taxes paid would likely show an even larger tax “refund,” but most people won’t believe it because of February’s headlines.
Whether you overpaid the government over the course of 2018 and received a refund or underpaid and wrote a check to the U.S. Treasury, by the time you cross the 2018 finish line your 2019 tax race is already 29% over.
What did you learn from your 2018 taxes that you can apply now to bring your 2019 tax bill down?
In working with your tax professional, you may wish to consider some of the following strategies for 2019:
- Increase your retirement plan contributions. The contribution limits for 401(k), 403(b), and other employer retirement plans increased on January 1. Check if your contributions are on pace to maximize the new higher contribution limit.
- IRA and Roth IRA contribution limits also increased on January 1. Take advantage of them if you are eligible.
- If you are over age 70.5, consider using a Qualified Charitable Distribution from your IRA account for your charitable donations instead of writing a check. This could be particularly helpful if you are no longer itemizing your deductions.
- If you took the standard deduction in 2018 because you just missed having enough itemized deductions, consider a bunching strategy for your charitable contributions. Making charitable contributions every other year may allow you to maximize the new higher standard deduction by alternating between claiming the standard deduction and claiming itemized deductions every year.
- In 2018 IAG was able to proactively offset some investment income for many clients by realizing capital losses on investments that declined in value and reinvesting in investments with similar upside potential. We will continue to look for those opportunities in 2019.
Your taxes are unique to your circumstances, so be sure to check with your tax professional to determine if any of these strategies could help you reduce your 2019 tax bill by taking action today.
Quote of the week: Winston Churchill: “We contend that for a nation to try to tax itself into prosperity is like a man standing in a bucket and trying to lift himself up by the handle.”
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Any opinions are those of IAG and not necessarily those of LPL Financial. Expressions of opinion are as of this date and are subject to change without notice. This information is not intended as a solicitation or an offer to buy or sell any security referred to herein.