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Educational Resources

By Jeffrey R. Wolfe, Senior Vice President, Manager of Wealth Planning Strategies

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The end of the year is a wonderful time to review your tax situation for opportunities to pay less taxes or pay taxes at a lower rate.  Review your portfolio, other investments and your projected income to see where you may find yourself on the tax bracket spectrum.  If you can, work with your tax advisor to see whether you should take or defer certain gains or deductions in this year or the next.

For example, you may be able to take a gain on an investment this year, or postpone it until January. If you think your tax rate will be lower next year, it may make sense to postpone the gain until 2020.  Similarly, if you are considering making a charitable donation and you expect your income (and tax rate) to be lower next year, consider making the donation in 2019 to offset your higher tax rate for this year. If you pay state estimated taxes, you could make your last quarterly payment in December rather than January to take the deduction this year. Ultimately, if you can control when to take a gain or deduction, choosing the appropriate time to take such actions can help you control your potential tax liability year over year.

These techniques are especially critical to review given the large standard deductions we have now.  Recall that the standard deductions are $12,200 filing single; $24,400 married filing jointly for tax year 2019.  Itemized deductions remain limited as well.  Generally, other than charitable deductions, mortgage interest, and state and local taxes (with a cap on state and local deductions being $10,000), most itemized deductions no longer exist.  Given these factors, accelerating or deferring gains and losses is critical.  If you are near the thresholds for itemizing, you may want to make bigger charitable gifts or an extra interest payment on your mortgage this year and plan on taking the standard deduction next year.

These are complicated and time sensitive decisions.  Please remember, Benjamin F. Edwards & Co. does not provide tax advice, so it is important to consult with your tax professional for guidance tailored to your specific situation.  Doing so may lessen the tax blow for this year and the year to come.

December 10, 2019 |