Its that time of year to start finding ways to limit the amount you are going to owe ol’ Uncle Sam. Instead of giving the US Treasury a piece of your hard earned dollar, its always nice to legally keep some of that dough in your own pocket.
Below are 3 that could possibly help out a bit. (note: this is not tax advice and a CPA or Accountant should be consulted).
MAKE AN IRA CONTRIBUTION
Those IRAs that are sitting there that you haven’t look at in years. It’s time to say hello and throw a few bucks in the account. Contributions to a traditional individual retirement account can be tax-deductible in the year you make them. While different IRS rules on IRA contributions apply to differing situations, you can generally deduct the full amount of an IRA contribution. Your contribution might be limited based on your adjusted gross income. If you—and your spouse, if married—don’t have a retirement plan at work such as a 401(k), you can deduct the full contribution to your traditional IRA on your tax return no matter how much you earn. For example, if you are in the top tax bracket of 37% and make a $6,000 deductible contribution—the maximum for 2019—you can save as much as $2,220 in taxes based on 2019 tax rates. Best of all, unlike most tax-saving strategies that must be in place by December 31, you can contribute to an IRA all the way until tax filing day, usually April 15th.
TAKE CAPITAL LOSSES
Well, the market sure has had a solid year. Heck, the S&P 500 is up over 25% for 2019 alone. Though it could be tough to find losses in 2019, its not impossible. If your holding onto that Macy’s stock (M) you are down about 50%. How about fancy Nordstrom—down 30%. If you lose money on a capital investment, such as a stock, you can use that loss to reduce your taxes. But you’ll have to sell the stock at a loss first, a process known as “realizing” a loss. Once you realize a loss, you can use it to offset any realized capital gains you may have. If you have more capital losses than gains, the IRS allows you to use up to $3,000 of that excess loss to offset your ordinary taxable income.
Don’t forget about your favorite animal shelter non-profit or cool environmentally focused 501c3 out there. When you write them a check it generally can be deductible as well. There are more than 1 million public charities and over 105,000 private foundations in the U.S. that could always use some extra jingle.
BONUS: SELF EMPLOYED
Happen to work for yourself. Well, here’s a holiday bonus. A Simplified Employee Pension (SEP) plan provides business owners with a simplified method to contribute toward their employees’ retirement as well as their own retirement savings. SEPs can get set up to contribute up to 25% of salary up to an annual maximum, and that amount is going up in 2019. Maximum contributions are $56,000 in 2019.
If you have questions about sustainable and socially responsible investing, contact Sustainvest for your free portfolio review.
Dale Wannen, MBA
Founder Sustainvest Asset Management
Sustainvest Asset Management is a fee-only registered Sonoma County investment advisory firm focused on sustainable and responsible (SRI) investing. We align our client’s investments with their goals and values through sustainable companies. Whether you are a new or seasoned investor, I offer a complimentary consultation on your investment strategy.
Clients include individuals, families, foundations and non-profits with financial planning services including investment management, 401k, 403b or IRA rollovers, trust accounts, non-profit asset management, retirement planning, fixed income investing and managing inheritances.