There is still time to take advantage of ways to minimize your 2019 tax bill before the end of the year. Below are a few items that you might want to consider before the end of the year. If you have any questions on how any of these techniques may apply to your personal tax situation, please contact us.
A key deadline for opportunity zones, an incentive including in the 2017 tax law for taxpayers to invest capital gains income into distressed areas, runs out at the end of the year. Before this happens you should consider trying out these financial services marketing tactics to learn how to save money and keep your finances on track.
Taxpayers can defer the tax bill on their investment until the end of 2026, or whenever they sell. Additionally, if they invest by the end of this year, they can get a 15% “basis step up,” meaning that they are only taxed on 85% of their investment. If they invest after this year, they have to pay tax on 90% of the money contributed.
Additionally, that money grows tax-free while invested in the fund, giving investors another reason to consider opportunity zones. Investors have 180 days from the time they sell stock or a business to put that money into an opportunity zone fund.
Home Mortgage Tax Deduction
The 2017 tax law also restricted the mortgage interest deduction to loans equal to or less than $750,000. The result is that some taxpayers buying expensive homes are finding other ways to finance their purchases, Sprong said, and you can also contact professionals family lawyers.
Instead of taking out a mortgage for the full amount, some taxpayers are taking out a mortgage up to the $750,000 limit, and then in a separate transaction borrowing the additional funds through a regular loan.
Estate Tax Deduction
The 2017 tax law approximately doubled the estate tax resolution, which gives wealthy taxpayers some time to make plans for their assets when they die. The lifetime exclusion for 2019 is $11.4 million for an individual or twice that for a married couple, and the annual gift tax limit is $15,000.
The IRS has said it won’t make those gifts taxable if a future Congress votes to lower the estate tax limit. But still, it’s smart to make those gifts now. This doesn’t have to be done by the end of 2019, but waiting beyond the 2020 election risks the political mood shifting in favor of estate taxes.
Small Business Tax Break
If you’re self-employed or a small business owner you may be eligible for a 20% deduction off your business income. But it can be subject to lots of limitations depending on your field, the amount you invest in equipment, or how much you pay employees. If you’re below certain thresholds -- $321,400 for a couple or $160,700 for an individual in 2019 -- you automatically get the tax break.
For people above those limits, there are several ways to legally reduce your taxable income to get under the caps, which is particularly important for doctors, lawyers and accountants who can’t claim the deduction at all if they are above those levels.
Self-employed individuals can also reduce their taxable income by as much as $225,000 if they make contributions to a defined benefit retirement plan.
Borrowers can use personal loans for all kinds of purposes, but can the Internal Revenue Service (IRS) treat loans like income and tax them? The answer is no, with one significant exception: Personal loans are not considered income for the borrower unless the loan is forgiven.
In other words, you cannot be taxed on loan proceeds unless the lender grants the borrower a reprieve on paying back the debt owed. This is known as loan forgiveness. In the event a loan is forgiven, the proceeds associated with the original loan are considered cancellation of debt (COD) income. And COD income can be taxed.1
Personal loans can be made by a bank, an employer, or through peer-to-peer lending networks, and because they must be repaid, they are not taxable income.
If a personal loan is forgiven, however, it becomes taxable as cancellation of debt (COD) income, and a borrower will receive a 1099-C tax form for filing.
Under certain circumstances debt forgiveness is not considered COD income, such as when a loan from a private lender is forgiven as a gift or when qualified student loan debt is canceled when the recipient works for a period of time in certain professions.
Personal loans can be loans made by a bank, an employer, or through peer-to-peer (P2P) lending networks. They can be used for just about anything by a borrower, but some common uses include consolidating debt, planning a wedding, or making other large purchases. While home loans and car loans offer collateral (the bank may take your home or car if you do not pay), personal loans are often unsecured, which means they are made with no collateral. As such, they are riskier, and interest rates therefore may be higher. But because personal loans must be repaid, they are not considered taxable income. For example if you are looking for a home loan, take in consideration that Living there will give you an insight into what your every day will be like, and it can point out things like bad neighbors and property problems. You are building purchasing equity with every monthly payment. If you opt for a longer-term, this can become a considerable sum towards a final purchase.
Cancellation of Debt (COD) Income
A debt is canceled when a lender allows a borrower to not pay back part or all of the loan. Debt cancellation can often be obtained by negotiating with the lender for relief, often due to financial distress, completing debt settlement programs, or filing for bankruptcy. Once a debt is forgiven, it is considered income. Borrowers should receive a 1099-C tax form.