Remaining 2019 Tax Deductions Before You File
If you’re like most Americans you’ve possibly already filed your 2019 Tax Return or are starting to get ready to file it. Most tax deductions need to be done during the tax year to take advantage of them but there still are a few that you can take advantage of before you file.
#1 Contribute to an HSA account if you’re eligible and haven’t done so for 2019 or haven’t maxed out your contribution fully for 2019.
HSA accounts are still one of the best kept secrets in retirement planning. Most people are unaware that you receive a deduction on the contributions, the money can grow tax deferred while it’s in the HSA account, and when you take it out it’s tax free if used for medical expenses. There is no other triple tax-free plan available in retirement planning. In order to get the most out of your HSA plan it is best to let your contributions grow over time and pay health care related costs(such as co-pays and prescription drugs) out of pocket. You should maintain an excel or google sheets file tracking these expenses and then later on you can take out the money tax free. The more time you give the money to grow the more it will work for you.Once you reach 65 take money out that is not for medical expenses and only pay tax on it, no penalties. There are also many HSA providers that allow you to invest the money in mutual funds or ETF’s will little or no cost such as Fidelity or TD Ameritrade. The limits for a single person are$3,500 and $7,000 for a family. If you’re over 55 you can also contribute an additional $1000. If you’re married each spouse should have their own HSA account to take advantage of the over 55 extra $1000 contribution.
#2 Make a Traditional Deductible IRA Contribution or Spousal Deductible IRA Contribution.
If you have earned income for 2019 then depending on your Adjusted Gross Income (AGI) and whether or not you are covered by an employer retirement plan you or your spouse may be able to make a deductible IRA contribution for 2019 and reduce your taxable income by that amount. If you are single and not covered by an employer retirement plan,then you can make a $6,000 ($7,000 if you’re over 50) deductible contribution for 2019 up to any income level. If you’re single and covered by an employer retirement plan,then your AGI must be under $64,000 to make a $6,000 ($7,000 if you’re over 50) deductible contribution for 2019.Between $64,000 and $74,000 AGI you can make a pro-rated reduced contribution. Once your AGI is over $74,000 you can no longer contribute.If you’re married and you and your spouse are both covered by an employer retirement plan and your AGI is under $103,000 then you both can make the $6,000 ($7,000 if you’re over 50) deductible contribution for 2019. From an AGI of $103,000 to $123,000 you can make a pro-rated reduced contribution. Once your AGI is over $123,000 you can no longer contribute. If you’re married and only one spouse is covered by an employer retirement plan and your AGI is under $196,000 the spouse not covered by an employer retirement plan can make a $6,000 ($7,000 if you’re over 50) deductible contribution for 2019.This is known as a Spousal IRA contribution. The other spouse can’t make a contribution. If you’re married and neither spouse is covered by an employer retirement plan,then you can both make a $6,000 ($7,000 if you’re over 50) deductible contribution for 2019.
#3 Contribute to SEP IRA.
If you have self employed income for 2019 and you didn’t set up a Simple Retirement Plan or 401K Plan by the 2019 deadline you can still make a retirement plan contribution. With a SEP IRA you have until you file your 2019 taxes, including extensions,to set up and fund this retirement account. The maximum contribution is $56,000, up to 20% of net earnings. SEP IRAs are available for all business types including sole proprietorships, partnerships, limited liability companies, S corporations and C corporations. Keep in mind if you have employees you must contribute the same percentage for them too.
You can use IRS Link https://www.irs.gov/retirement-plans/self-employed-individuals-calculating-your-own-retirement-plan-contribution-and-deduction to see how the calculation is performed .
