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Planning for your taxes takes more than a few hours every Spring. Proper planning throughout the year can mean more money in your pocket and less headaches in April. Follow these tips for a more effective tax strategy for 2019.

Check your paycheck withholdings.

Did you know that the tax law changed in 2018? This means that the amount you pay in taxes could be different than what you’ve been used to.

If you didn’t adjust your withholdings last year, take time to familiarize yourself with the new rules as you file your 2018 taxes. Getting a large refund? This may be due to the larger standard deduction or the child tax credit that doubled. Withholding less taxes from your paychecks throughout the year will allow you to put that money to work more effectively each month.

Check your Roth IRA eligibility.

The ability to contribute to a Roth IRA is dependent on your modified adjusted gross income for that year. In 2019, a couple filing taxes jointly is not eligible to contribute to a Roth IRA if their modified adjusted gross income is $203,000 or more. Need to lower your adjusted gross income to make Roth contributions? Try saving in your pre-tax 401k at work. This will lower your income. In 2019 you can defer up to $19,000 in your 401k.

Filing status Modified AGI Max contribution
Married filing jointly Less than $193,000 $6,000 ($7,000 if 50 or older)
$193,000 to $202,999 Reduced amount
$203,000 or more Not eligible
Single, head of household, or married filing separately Less than $122,000 $6,000 ($7,000 if 50 or older)
$122,000 to $136,999 Contribution is reduced
$137,000 or more Not eligible

Note that adjusted gross income is the number before your standard or itemized deductions.

Review your taxable investments for opportunities to harvest losses.

Tax loss harvesting means selling some of your taxable investments that have experienced a loss. This loss is then used to offset taxes on gains or income. Being smart about managing losses can boost the after-tax return on your investments.

With the recent market volatility, you may have some investments with a loss. Tax loss harvesting strategy involves selling the security and using the proceeds to buy a similar (but different) security, as you still want your money invested and working for you. But be careful—buying the same or substantially identical security within 30 days will trigger a “wash sale,” meaning you won’t get to claim the loss after all.

Sound complex? It can be!  At Stewardship, we enable tax loss harvesting for your taxable investment accounts and we’re always happy to walk you through the process.

New retirees can file to avoid additional Medicare costs.

For new retirees over age 65 who also enroll in Medicare, some simple tax planning can save a few hundred dollars each month on Medicare Part B and Part D premiums.

Your monthly Part B and D premiums each year are based on your modified adjusted gross income from two years ago (so your 2019 premiums are based on your income from 2017).  While many people pay the “standard” monthly premium of $135.50 for Medicare Part B, people with higher income pay an Income Related Monthly Adjustment Amount (IRMAA), which increases your costs.

The IRS has outlined only a few specific “life-changing” events that may get you a reduction in your additional IRMAA costs.  One of these is “work stoppage” (i.e. retiring). Higher income earners that retire can file an IRS form to report their work stoppage and avoid having their income from two years ago (when they were employed) used to determine their Medicare costs in retirement.

Did you know you can make retirement contributions for your 2018 taxes until April 15? Stewardship Financial can help you make wise decisions on the best retirement accounts to help minimize your tax liability for 2018. We would love to talk to you more about this! Simply click the link below to schedule with us.