Once the holiday season ends, many individuals begin looking ahead to the April 1 tax deadline. January is a great time to review your documents and make adjustments that could help you save.
Get ready to file your 2019 tax return with these smart planning strategies.
Deduct charitable donations
Whether you give to important causes all year or you concentrate your philanthropy during the holiday season, capture the information about your charitable donations so you can take a valuable tax deduction. You can deduct the full amount of cash and check donations to qualifying charities and the fair market value of property and other in-kind donations. You will need a receipt or other form of acknowledgment from the charitable organization to take this deduction.
Contribute to your retirement account
You can fund your 2019 Roth or traditional IRA until April 2020, and contributions of up to $6,000 are tax-deductible. If you have self-employment income, you can limit your tax burden by contributing up to $56,000 in a solo 401(k) or SEP-IRA retirement account.
Prepay college tuition
If you are helping to fund the higher education of your children or grandchildren, you can pay tuition in advance and take the available American Opportunity Tax Credit on your 2019 tax return. This credit is worth up to $2,500 when you use those funds for eligible tuition expenses. Even parents and grandparents of younger children can lower their state tax burden by opening a 529 college savings plan. Taxpayers in Pennsylvania can deduct up to $14,000 ($28,000 for married couples filing jointly) from their state return.
Check your tax withholdings
If you or your spouse changed jobs, got a raise or had more than one job in 2019, it is important to check your tax withholdings. If you did not set aside enough money from your paycheck, you can increase your withholdings to avoid a surprise bill.
With these steps, you can potentially reduce the income taxes you pay for 2019.
