2019 Year-End Tax Guide

THE MARCUM 2019 YEAR-END TAX GUIDE | www.marcumllp.com

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VI.) CHARITABLE DONATIONS Year-end is a great time to make donations to qualified charities. Generally, cash donations to public charities are fully deductible up to 60% of adjusted gross income (AGI), and gifts of appreciated property or gifts for use by public charities are deductible up to 30% of AGI. This benefit only applies if you itemize deductions. For donations made during the year, be sure to get acknowledgement letters from the qualified charities for both cash and property (including stock donations) over $250. If you are not certain if a particular charity is qualified, you can consult the IRS website at http://apps.irs.gov/app/eos/ and search for the organization in question. Planning Opportunities: n Consider bunching donations into alternating years if your total itemized deductions on those years would then surpass your standard deduction. n Donate appreciated stock to charity to avoid paying capital gains tax and get a fair market value deduction for stocks held for more than one year. n Sell depreciated stock and donate the cash proceeds to charity. You will receive a charitable deduction as well as a capital loss benefit on the sale of stock. Capital losses offset capital gains, and any resulting net loss in future years offsets a maximum of $3,000 in ordinary income for a married filing joint taxpayer ($1,500 for all other taxpayers). VII.) 401K AND SEP CONTRIBUTIONS Contributions to a traditional employer-sponsored defined contribution plan are typically pretax, therefore reducing taxable income. If you are an employee and your company offers a 401K plan, you should try to maximize your contribution to boost your retirement savings and save current year taxes. The maximum contribution to a 401K plan increased to $19,000 in 2019 (from $18,500 in 2018) and is scheduled to increase to $19,500 for 2020. Employees age 50 or older can also make an additional “catch-up” contribution of up to $6,000 (scheduled to increase to $6,500 in 2020.) If you are self-employed, consider setting up a self-employed retirement plan (SEP) or some other type of retirement plan in order to maximize the allowable contribution each year.

VIII.) FLEXIBLE SPENDING ACCOUNT (FSA)

Amounts contributed to a healthcare Flexible Spending Account (FSA) are not subject to federal income, Social Security or Medicare taxes. For 2019, the maximum contribution is limited to $2,700 (increased from $2,650 in 2018). Historically, the “use it or lose it” provision applied to amounts contributed to a flexible spending account. However, there is a carryover provision which allows participating employees to carryover up to $500 of unused funds to the following year if your employer offers this option. Some employers may offer a grace period to incur eligible medical expenses, generally two-and-a-half months after year-end. Check with your employer for the rules on the established FSA plan. IX.) HEALTH SAVINGS ACCOUNT (HSA) If you are covered by a qualified high-deductible health plan, you can either contribute pre-tax income to an employer- sponsored Health Savings Account (HSA) or make deductible contributions to an HSA you set up yourself. For 2019, the maximum contributions are $3,500 for single taxpayers (increased from $3,450 in 2018) and $7,100 for family coverage (increased from $7,000 in 2018). Taxpayers aged 55 or older as of the end of the tax year can contribute an additional $1,000. (This means HSA holders can contribute and reduce income by $9,000 if both spouses are over 55.) There is no “use it or lose it” provision with HSAs, as you can carry over unused balances from year to year.

X.) QUALIFIED CHARITABLE DISTRIBUTIONS (QCD)

Taxpayers who have reached age 70 ½ can donate up to $100,000 of traditional and Roth IRA distributions directly to qualified charities. The donation satisfies the minimum distribution requirement and is excluded from taxable income. A charitable deduction cannot be claimed for the contribution.

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