Locations in Arizona, Oklahoma, and Utah

Countdown to Tax Season

With 2020 barely started, preparation for tax season is underway for many investors. Now in the second year of filing taxes under the Tax Cuts and Jobs Act of 2017 (TCJA), focusing your attention on deductions you can use versus those that were eliminated will necessitate that you plan. The idea of TCJA was to increase the number of Americans who choose the standard deduction rather than itemizing. Here are a few standardized 2019 deductions you don’t want to miss:

Mortgage Interest Deduction and SALT– Mortgage interest is deductible up to $750,000 of debt; interest on mortgages on 1 million or more of debt originated before December 15th, 2017 is still deductible.

SALT (State and Local Tax) deductions cap at $10,000 annually; high earners in high tax states (CA, NY, NJ, IL, TX, and PA) could previously claim more than half of the value of the deduction and now are likely to receive more massive tax bills from Uncle Sam. As a concession for this circumstance, the tax legislation lowered the top marginal tax rate from 39.6% to 37%.

Health Savings Accounts (HSAs) offer two tax-deductible options-

Option #1- Those participating in a high deductible health plan can contribute $3500 (singles) and $7000 (family) through pre-tax payroll deductions to lower their taxable income.

Option #2- Those not contributing through pre-tax payroll deductions can contribute to an HSA from their tax-deductible funds, the money can be accessed tax-free when used for qualifying medical expenses.

With either option, the HSA money can grow tax-free in the account and any capital gains, interest, or dividends earned are non-taxable. Additionally, no longer is HSA money ‘lost’ if not used during the year, making HSAs another great way to save for retirement.

The Child Tax Credit Increase- is now$2000 per child under age 17. The higher tax credit doesn’t phase out until income exceeds $400,000 for joint filers and $200,000 for single filers. The increase is $110,000 and a $75,000 increase, respectively.

Maximize contributions and Play Catch up in 2020. You still have until the 2019 tax-filing deadline to make your maximum 2019 retirement savings account contributions if your account opened before December 31st, 2019.

Charitable Giving Contributions into a Donor Advised Fund are tax-deductible; the funds must distribute from the donor-advised fund directly to the non-profit, not from the investor. However, charitable deductions for tax-filers that itemize are still deductible.

Consult your tax professional to determine if using standard deductions or itemizing is best for your situation. If you have questions regarding tax-efficient investing, we welcome your inquiry and look forward to working with you and your tax professional.

*Advisory services offered through Trajan Wealth, L.L.C., an SEC-registered investment adviser. 

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