2019 Year End Newsletter

By: admin | December 6, 2019

2019 Year End Newsletter

With the end of the year upon us, we wanted to discuss some actions you can take between now and December 31 to optimize your tax situation. Tax reform is here to stay, so there are no big changes in the law. However, there are many actions, based on the current rules, that may help you save tax dollars if you act before year-end.

What Changed in 2019:

  • The Federal estate and gift tax limitation increased to $11,400,000.
  • The standard deduction increased to $12,200 per taxpayer, with the head of household deduction rising to $18,350.
  • The solar energy credit begins its sunsetting process. The full 30% of the cost of installing solar energy systems remains for 2019, but, unless it is extended, it is reduced to 26% in 2020, 22% in 2021, and be eliminated or reduced in 2022. If construction begins on a project in 2019, but is not completed until 2020, the full 30% credit may be available.  

Year-End Tax Planning Moves for Individuals:

  • Loss harvesting may be difficult due to the continued bullish market. However, if you have realized capital losses, sell appreciated stock and buy it back to step-up your basis in the stock.
  • Consider a “bunching strategy” to either pull or push medical expenses and/or charitable contributions into the year they will be most tax beneficial. If your itemized deductions are close to the standard deduction, boost your itemized deductions in one year, and take the standard deduction the next.
  • Make gifts sheltered by the annual gift tax exclusion ($15,000) before the end of the year to save on gift and estate taxes. The exclusion remains the same in 2019.
  • Donate appreciated assets to a qualified charity.  Your deduction will be the fair market value of the assets. Please see the blog post on our website discussing the various appreciated stock donation options.
  • Consider directing up to $100K of your required minimum distribution to a qualified charity. In 2019, this could be even more beneficial for those that will no longer itemize.
  • If you become eligible in December of 2019 to make health savings account (HSA) contributions, you can make a full year’s worth of deductible HSA contributions for 2019.
  • Now that the state income tax deduction is limited, consider purchasing SC tax credits to cover your SC tax liability. Some credits are available for purchase at a discounted rate and include the SC Mill, SC Abandoned Building, and the SC Historic Rehab Credits. There are also credit opportunities using the SC Exceptional Needs Program even though the charitable deduction has been eliminated. Please contact our office if you are interested in purchasing any of these credits, and please read our blog post regarding appreciated stock donations for more information.
  • If you have a capital gain event, consider reinvesting the gain in an Opportunity Zone Fund. To defer the maximum 15% of the gain, the investment must be made by December 31, 2019. Please contact our office for more information.

Year-End Tax Planning Moves for Businesses:

  • Analyze wages and net income for the year to maximize the qualified business income deduction.
  • Consider retirement plan options. Many plan contributions can be deducted in the current year, but the actual cash outlay does not have to be made until before the tax deadline the following year.
  • Major asset purchases can qualify for accelerated depreciation through Section 179 and 100% bonus depreciation.  Assets need to be placed in service by 12.31.19.  Since borrowing rates are still low, consider financing asset purchases.
  • Consider using a credit card to pay deductible expenses. Purchases made and placed in service by 12.31.19 are deductible.
  • More businesses are able to use the cash method of accounting. Consider conducting an analysis as to whether a change of accounting method would be beneficial.
  • For businesses on the accrual basis, consider declaring year-end bonuses in 2019 that can be paid out in 2020 (must be paid by 3.15.20).
  • Under the new 263 rules, if you maintain inventory, you may be able to deduct it in the year of purchase versus the year of sale. Please contact our office for more information.

 As referenced above, we have new blog posts on our website. Please take a look to learn more about accountable plans as well as planning options for appreciated stock. https://www.thelanninggroup.com/news/

You can’t spell planning without “Lanning!”  

If you would like to discuss tax planning moves in more detail or would like for us to calculate year-end projections, please contact us as soon as possible. Keep in mind that many of our employees will be taking vacations around the holidays.

The Lanning Group is celebrating its one year anniversary thanks to your continued trust and support.  We feel blessed to be surrounded by such wonderful colleagues and clients.

Sincerely,

Your TLG Team