Paying your individual income taxes likely represents one of the largest outlays of the year, but it also offers an opportunity for significant savings.
Whether you have paid individual income taxes through employer withholding or quarterly estimates, thoughtful planning before the calendar turns to 2020 can reduce your total tax liability and help retain more of your earnings. If you devote substantial research and forethought to how you invest your money, then you should take a similar approach to how that income will be taxed. With numerous changes to the federal tax code, BDO’s 2019 Year-End Tax Planning for Individuals Letter can help identify specific opportunities to reduce or defer your annual tax obligation.
And the sooner you start the conversation around tax planning, the more time you’ll have to carefully consider all applicable factors. This process requires a projection of your estimated income, deductions and tax liability for both 2019 and 2020 to determine your anticipated marginal tax rate. Reviewing the actual amounts from 2018 will help with those projections. You should determine the extent to which you can control the timing of income and deductions, and then optimize your Planning for the lowest overall tax in both 2019 and 2020. Important considerations include charitable gifts, capital losses, retirement contributions, potential gifts to children or grandchildren, and using trusts.
If you can’t reduce your overall tax liability, then it’s generally best to defer as much tax liability as possible to 2020. Individuals should also consider the tax implications for any businesses conducted directly or indirectly by the individual owners. To understand the important details that apply to those areas, you can review our 2019 Year-End Tax Planning for Businesses Letter. Because some guidance and regulations are still pending, we also suggest you consult our website regularly for additional updates and insights while you continue the planning process.
Download full blog here: Baldwin tax planning for individuals 2019.pdf