Things are easier now for most individuals when it comes to filing their personal taxes. President Trump’s tax cuts raised the standard deduction, making the standard deduction a better option than itemizing deductions for most people.
Regardless of whether you itemize deductions or take the standard deduction, there are still some additional ways you can reduce the amount of taxes you pay. From our team of Clearwater and Lutz CPAs, here are our Top 3 Personal Tax Tips for 2019:
1) Stack Deductions
The tax code allows us to deduct sales taxes and property taxes as itemized deductions in the individual’s income tax return.
You get the bill for your property taxes in November, but in reality, you can pay it anytime. Therefore, you could pay your property taxes in January for year 1, and then in November when your tax bill for year 2 arrives, you can pay it immediately in the same calendar year.
By doing this, you can double your deduction for personal property tax in that year.
You can also do the same for your charitable giving. If you typically make large charitable donations at the end of the year, you could make those donations in January and then in December of the same year.
By “stacking” your deductions in the same year, you may push your itemized deductions above the standard deduction that year saving you thousands more than if you had taken the standard deduction.
Then the next year when don’t have any property taxes and fewer contributions to deduct, simply take the standard deduction.
2) Fund Retirement Accounts
Money put into a traditional retirement account is deductable. The maximum deduction depends on your age and income level. You may be able to contribute up to $6,000 from your income to fund your retirement account, and you do not pay the taxes on that amount this year.
You do pay taxes on retirement contributions and their earnings in a future year when you withdraw them. Most likely when you are retired and withdrawing money from your retirement account, your income and your tax bracket will be lower. Therefore, by contributing to a retirement account now, you are not only deferring taxes on retirement contributions but also likely to pay significantly less in taxes.
3) Put Money into a Health Savings Account
If you have a high deductible health insurance plan, you are allowed to set up a health savings account (HSA) to put your money into for current and future medical expenses. The contributions you make to your health savings account reduce your taxable income.
The old Flexible Savings Accounts (FSAs) had the drawback of being “use it or lose it” each year. But HSAs are more flexible in that any money left in your HSA account at the end of the year automatically roles into the next where it can be used to pay that year’s medical expenses.
If you are looking for a CPA in Land O’ Lakes, Lutz, Clearwater, Largo, Dunedin, or Oldsmar to help you file and reduce your personal taxes, contact FMA, C.P.A for a free consultation.