End of Year Tax Considerations

Before the bells of midnight close out 2019, there are a few key considerations you may need to review to optimize your financial situation.

Its time to think about your taxes.

These suggestions require no market prognostication, and no sooth-saying of what the future has waiting for us. If these action items are applicable to your unique situation, acting upon them will result in an unquestioned objective win. A rare certainty in this uncertain world in which we live.

Many tax strategies only need to be acted upon before the April tax filing deadline of next year, but here are several important considerations that require attention before the New Year's Eve revelry.



1- Maximize funding to Employer-Sponsored Contribution Plans (401k's, 403b's, etc.):
While each employer-sponsored contribution plan may have slight underlying differences; traditionally, every employee can contribute $19,000 per year to their company retirement plan. Workers aged 50 and older can contribute an additional $6,000 for a total contribution of $25,000.  

2- Confirm you are contributing appropriately to your Employer Sponsored Contribution Plans:
Many employer retirement plans allow contributions to be made in either a ROTH contribution manner or a Traditional contribution manner. The major difference in these two options is how they are taxed. 

3- Consider Charitable Gifting: 

For those over 70.5 years old who are forced to take required minimum distributions (RMD's) from their IRA accounts, Congress recently made permanent a fantastic tax advantaged way to donate to your favorite charity.  

4- Charitable Gifting Part II:

With recent changes to tax-code, the standard deduction for tax-payers has doubled. Thus, the number of households that will itemize their deductions will drop correspondingly. Look at options for bunching charitable gifting amounts together; meaning pool multiple years of charitable contributions in to one particular year in order to further assist in exceeding the standard deduction. 

5- Gifting To Loved Ones:

An annual gift from you to any individual can be as much as $15,000 in 2019 without triggering any tax consequences for either you or the recipient. If you're blessed to be in a financial position to help your beneficiaries reduce their own financial stresses now, this may be a tax efficient way to help out instead of an eventual one-time lump sum gift in the future when it may not be as helpful.

6 - Funding 529 College Education Savings Accounts:

Every individual state has their own laws in place, but most provide excellent opportunities via 529 College Education Savings Accounts to allow parents, grandparents, or whomever to contribute. This amount can be deducted from state income taxes if applicable.  Most importantly, these contributions then grow tax-free with no future capital gains consequences, as long as the assets are used for qualified education expenses (tuition, books, etc.).

7- Pre-Payment & Additional Payment Plans: 

Again, if you're blessed enough to have a little extra money lying around at the end of the year, it is prudent to pre-pay or make additional payments where possible.  Making an extra payment on your mortgage or if you make estimated quarterly tax payments, getting these payments in before the end of calendar year 2019 may provide extra tax related benefits.

These are important discussions to have, and we would not be doing our job if we failed to encourage you to put the puzzle pieces of your financial life in to the correct tax positions. Please reach out to an advisor to define which of these ideas might fit your current/future financial situation. 

The above list is not all-encompassing, and more importantly, needs to be discussed with your tax professional.  We do not hold ourselves out as tax professionals, and we recommend consulting with your tax expert based upon your particular circumstances. In our opinion, tax advice and investment advice should come from separate sources.


James Battmer on November 25th, 2019

Posted by James Battmer

James Battmer currently serves as Chief Investment Officer for Resources Investment Advisors. In his role, James is responsible for providing executive oversight of the firm’s investment strategy and execution, in addition to overseeing all institutional and high-net-worth client accounts. James has 20 years of experience in the industry, his experience lies in macroeconomic policy, fixed income management and equity selection. Prior to joining Resources Investment Advisors, James previously worked at UMB Bank and Morgan Stanley.

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