Tax Tips for 2019

By Mitchell J. Smilowitz, CPA

Most likely you’ve recently filed your 2018 tax returns. For most of us, the idea of putting more thought into taxes is one of the last things we want to do. And yet, a bit of focus now can make a big difference when you file your 2019 taxes.

Contribute as Much as Possible to Your Retirement Account

Maximizing the contribution you make to your retirement account remains one of the best ways to reduce your income taxes. Contributions to your JRB retirement account are tax-deferred; you don’t pay taxes on the money you invest until you withdraw it in retirement.

Consider this very simple example. If your nominal tax rate is 22% and you contribute the maximum to your JRB account ($19,000 for those under 50), you could reduce your tax liability by as much as $4,180. Your taxes may well be more complex than this example and the actual reduction in your tax liability will differ, but contributing to your retirement account is still likely to be one of the best tax reduction strategies available to you.

Can’t contribute the maximum? No problem. Make a commitment to gradually increase your contribution until you reach the maximum – and begin this year. For more information, see our article, 2019 JRB Retirement Plan Contribution Limits.

Review Your Withholding

Did you owe more in taxes this year than you expected? Was your refund smaller (or larger) than in previous years? If so, you may want to update your payroll tax withholding. To do this, you’ll need to complete the IRS Form W-4 and return it to your employer. The IRS Withholding Calculator can help you determine how much you need to withhold.

Consider These Tax Credits

Retirement Savings Contributions Credit

In addition to lowering your taxable income, you may be eligible for a tax credit when you contribute to your JRB retirement account. Tax credits lower your tax liability. To qualify for the “Saver’s Credit,” you must be over 18-years-old, not a full-time student and not claimed as a dependent on another person’s tax return. The tax credit is also subject to income limits. If you qualify, the credit is in addition to the reduction in taxable income you get by making a contribution.  In other words, you get two tax benefits.  To learn more, see the IRS publication Retirement Savings Contributions Credit (Saver’s Credit).

Child and Dependent Care Credit

You may be able to claim the child and dependent care credit if you paid expenses for the care of a child under age 13 or other dependents who are incapable of caring for themselves and live with you for more than half the year. The credit covers care provided when you are working or looking for work. The IRS publication Child and Dependent Care Expenses provides more detail.

Lifetime Learning Credit

The lifetime learning credit covers qualified tuition and related expenses for undergraduate, graduate and professional degree courses, including courses to acquire or improve job skills. There is no limit on the number of years you can claim the credit. You can claim the credit for yourself, your spouse or dependents. The IRS has additional information in its Lifetime Learning Credit fact sheet.

Before putting taxes to the side, take a few minutes to think about what you can do to reduce the taxes you will pay in 2019. Consider increasing your retirement contribution, reviewing the amount you are withholding for taxes and your eligibility for popular tax credits. Need some assistance? Contact the JRB by email or call 888-JRB-FREE (572-3733).