It goes without saying that 2020 has brought a unique set of challenges to almost all aspects of life. As many of us look forward to brighter days in the future, now is the time to plan for the upcoming income tax return season with year-end tax planning.
As we close out the year, consider the following ideas that could possibly reduce your tax bill or increase your tax refund for 2020, and feel free to contact our trusted tax advisors to determine a tailored plan for your unique tax situation.
Tax planning tips:
- Determine if the generous standard deduction or itemized deductions are right for you. For 2020, the standard deductions for singles is $12,400, $24,800 for married couples filing jointly or $18,650 for heads of households.
- Investment gains and losses in taxable accounts must be carefully managed. Call our tax pros to discuss a personalized strategy.
- Traditional IRA contributions for all. If you’re above age 70 ½ consider making a charitable contribution from your IRA to exclude it from your income.
- Take advantage of the 0% tax rate on investment property. There are 2020 tax benefits depending on your income amount.
- Convert a traditional IRA to a Roth account to avoid potentially higher future tax rates.
- Are you caring for an elderly loved one? Various tax breaks are available.
- Keep in mind recent IRA changes, including the increase of age required for minimum distributions, no more maximum age for traditional IRA contributions and benefits for those who inherited an IRA or 401K. Graduate students and new parents also have access to some IRA-related tax benefits. We can help to determine what’s best for your particular tax situation.
- Determine if your child or relative should be considered a dependent. Age, how long they have lived with you, types of financial support provided and other factors all apply.
If you own a business, consider these ideas before the end of 2020:
- Establish a tax-favored retirement plan. This allows for significant deductions.
- Net Operating Losses under the CARES Act allow a small business that expects a loss in 2020 to carry back 100% of that loss to the prior five years.
- Take advantage of generous depreciation tax breaks. You may be able to write off 100% of your 2020 asset additions. Call us to discuss.
- Qualified Improvement Property (QIP) may be a consideration if you improved your business property in 2020.
- Accurate mileage logs are critical!
- Do you hire your children or other family members? There may be tax-saving strategies for you.