TEMECULA – The holiday season is in full swing and before people know it, 2019 will come to a close. Whether they are having a good year or are still recovering from last year’s surprise tax bill, residents may be able to save a bundle on their taxes with these last-minute moves to avoid going into the next bracket before the end of the year.
Rebecca Gramuglia, personal finance expert at TopCashback.com, shared some tax bill insights.
Estimate the tax bill now. Rather than waiting and being surprised by a huge tax bill, use the IRS’s withholding estimator to estimate how much will be owed or received on the tax return before the end of 2019. The estimator will also give suggestions on future withholding options.
Take some last-minute tax deductions. Before preparing and filing their 2019 tax return, which is due April 15, they should make sure to maximize all 2019 tax credits and deductions before New Year’s Eve.
Maximize 401(k) contributions. There may be no better investment than tax-deferred retirement accounts. Maxing out 401(k) contributions at $19,000 for 2019 or $25,000 for people age 50 or over, for example, will not only boost their retirement, but also lower their taxable income for the year.
Make an extra mortgage payment. One of the simplest ways to increase deductions is by making an extra mortgage payment before the end of 2019. Making the mortgage payment that’s due Jan.1, before the end of December, for example, will allow homeowners to include the interest payment as part of their itemized deductions for 2019’s tax returns. And if a homeowner plans to do make this payment, they should be sure to notify the bank that they want the payment applied immediately so it can count for this year. Borrowing a future deduction and using it this year is helpful if they’re trying to qualify for other tax breaks by staying under a certain taxable income.
Delay income. For those who are freelancers or independent contractors, consider holding off on billing or invoicing clients until January. Delaying any billing until January will keep that income off the 2019 tax return. Thus, they can delay paying taxes on that income until next year.
Defer a bonus. Who doesn’t love to see more green at the end of the year? While year-end bonuses are nice, they can be quiet costly if that extra money bumps the employee into a higher tax bracket. To avoid this issue happening, try having the bonus deferred until January.
Install solar panels. Homeowners can score a tax break by simply being environmentally conscious. Before 2019 wraps up, consider installing solar panels or other energy-efficient features to earn a tax credit of up to 30% of the installment cost. It may be the last year to score this rate as the 30% rate is set to drop in 2020 and may be phased out completely by 2022 for residential customers.