Perspective

2019 Year-end Checklist

2020 Calendar and Computer

As the end of year approaches, it is a good time to look back at the targets you’ve met and start developing goals for the new year. It’s also a great time to execute important financial contributions in order to take advantage of end-of-year tax incentives and get a head start on next year’s financial planning. The checklist below highlights a few of the items you may want to consider:

Annual Gift Exclusion

The annual gift tax exclusion remains at $15,000 ($30,000 for a married couple) from 2018.  There is no limit on how much you can gift in total per year. However, there is a limit on how much you can gift to any single individual per year without triggering a gift tax. Gifts must be completed by year-end to qualify for this year’s exclusion.

Charitable Gifting

Bunch charitable contributions for two or three years using a Donor Advised Fund (DAF). If you are on the cusp of being over the standard deduction, you might consider accelerating your gifts for future years. For more details on charitable gifting strategies with the new tax law, you can reference this link to a blog post on our website here.

Education Contributions (529)

A special provision allows you to accelerate your annual gifts and use up to five years of your annual gift exclusion in one year ($75,000 per person or $150,000 per couple).  You must file a gift tax return with this strategy.

Beginning in 2018, some states started allowing up to $10,000 per year to be distributed from a 529 Plan for primary and secondary education. In the past, distributions could only be used for “qualified higher education expenses.” Be sure to verify with your state plan provider.

Retirement Plans

If you were 70.5 years old or older in 2019, you must take an RMD from your retirement accounts (excluding Roth IRAs) before December 31, 2019. If this is your first RMD (meaning you turned 70.5 in 2019), you are not required to take it until April 1, 2020, but you would then be required to take two years’ worth of distributions in 2020. Please consult your advisor regarding implications on the timing of your RMDs.  Up to $100,000 of your RMD can be gifted directly to a qualified charity.

Healthcare and Medicare

  • HSA contributions increased from $6,900 to $7,000 for family plans in 2019 ($3,500 for single).
  • FSA contributions increased from $2,650 to $2,700.

Keep in mind, that unlike HSA funds, funds in your FSA typically do not roll over from year to year (based on an employer plan, you may be able to elect to roll over $500 or you can elect a “grace period” to use funds). The deadline to use these funds is December 31, 2019, or March 15, 2020, if you elect to use the grace period.  

Some Other Tax Considerations

  • Alimony is no longer deductible for payor agreements signed after 12/31/2018.
  • There is a new business owner deduction for passthrough income with the exception of special service businesses (i.e. accountants, consultants, doctors, etc.)
  • Medicare 3.8% surtax still applies to investment income (a.k.a. Net Investment Income Tax), and an additional 0.9% Medicare surtax tax remains until 2023, which applies to wages and self-employment income above $250k per couple ($200k for single). Distributions from retirement accounts and SS benefits are excluded. 

*For a full list of changes to itemized deductions from 2017 – 2019 click here.

Source: The Tax Cuts and Jobs Act (TCJA) Pub.L. 115–97