The year 2019 is coming to an end, but if you act now, there are a few ways to lower your 2019 tax liability.
We are now into the second tax filing season under the Tax Cuts and Jobs Act. Most of us have discovered we are no longer itemizing. Since the new law just about doubled the standard deduction($12,200 for singles and $24,400 for married-filing jointly in 2019), itemized deductions are out of reach for many filers.
Other write-offs have been limited as well: Consider there’s now a $10,000 cap on state and local tax deductions.
So what can you do to cut your tax bill? Here are a 3 tax breaks you can still take advantage of.
- If you have an IRA, you have until April 20, 2020 to make a contribution and have it count in 2019. However, if you have a 401(k) with you employer, you only have until December 31st to set aside money. For 2019 you can save up to $19,000, or $25,000 if you are 50 or over. These contributions come out of your paycheck, and reduce your taxable income for the year.
- Do you have a high-deductible health plan at work? If so, and you have a health saving account(HSA) you can save some more there. In 2019, you are allowed to contribute up to $3500 for self-only coverage, or $7000($8000 age 55 or over) if you have a family plan. Contributions are made pretax, or are tax-deductible. These funds grow untaxed, and withdrawals for qualified medical expenses are tax free.
- There is a $7500 tax credit per purchase of a new electric vehicle. Take caution though. The amount of the credit begins to phase out for a manufacturer after more than 200,000 cars are sold.
- If you are considering solar panels, push to get installed before the end of the year. If you do, you can take advantage of a 30% credit. Next year, the value of the credit declines to 26%, and then to 22% in 2021. After that year, homeowners lose the tax break altogether.
- If you are thinking of taking classes next year, pay for your expense before December 31st and you may be eligible for the Lifetime Learning credit. The credit can potentially be up to $2000 per return, but is subject to phase outs. The credit phases out for single filers with modified adjusted gross income between $58,000 and $68,000 in 2019 ($116,000 to $136,000 for married couples filing jointly).
- Remember – If you’re paying off a student loan, you can take a deduction for the interest of up to $2,500. This is an above-the-line deduction, so you don’t have to itemize your return to get it.
Source: Darla Mercado, CNBC