Dear SWP Client,
We want to provide you with some tax planning strategies as well as some savings tips for you to consider as 2020 comes to a close.
AVOID UNEXPECTED TAX CONSEQUENCES
- Verify that you are having the right amount of taxes taken out of your paycheck for Federal tax payments. The IRS has a tool you can use, https://www.irs.gov/paycheck-checkup, for this purpose.
- Unemployment benefits are taxable as income. If you did not have taxes withheld from these benefit payments, you will owe estimated taxes on the money you received.
LOOK FOR TAX SAVINGS
- Working from home as a self-employed person? Keep track of the space you are using and any expenses you incur to file for a home office deduction. Unfortunately for full-time employees working from home who have to buy chairs, computers and other supplies, the Federal income tax deduction that would have covered your home office was removed by the Tax Cuts and Jobs Act.
- Keep track of your medical, dental and drug costs and save all receipts. You may qualify for a tax deduction if your unreimbursed expenses exceed 7.5 % of your adjusted gross income and you itemize your deductions.
TAKE ADVANTAGE OF 2020 CHANGES FOR CHARITABLE DONATION DEDUCTIONS
- If you choose a standard deduction for 2020, you can receive a charitable giving deduction of up to $300 for cash donations (cash, check and credit cards) to qualified charities. This deduction will appear “above the line” for calculating adjusted gross income. This deduction applies to a tax filing unit, not to each person.
- If you itemize your deductions, your charitable deductions were generally limited to a 60% adjusted gross income deduction. For 2020, the AGI limit has been eliminated for cash donations by individuals.
INCREASE YOUR PERSONAL SAVINGS
- If, like many others, you are spending less by staying at home more, consider adding the savings to your savings or investment account. Perhaps open a 529 account college savings plan for your children or grandchildren. And, if at all possible, maximize your workplace retirement savings.
- Consider a Roth conversion. Review our previous blog, https://awealthplan.com/is-a-roth-ira-conversion-right-for-you, for reasons to consider a ROTH IRA conversion. 2020 may be a good year to make the conversion which must be elected (with paperwork completed and submitted) before December 31, 2020.
As always, please let us know if you have any questions. We are happy to speak with you.
The SWP Team
Disclaimer: SWP does not offer tax or legal advice. Additionally, each individual situation is different and for this reason, you should consult your CPA to discuss which tax planning strategies will work for you.