Keep more of what you earn – 3 tax tips for the coming year
Most of you have already filed your 2018 taxes and maybe learned (the hard way!) that there were tax tips and advantages you missed. Don’t let that happen again; read below for what to do in 2019 to save big on your tax return.
Get started early
The changes to the tax laws from the Tax Cuts and Jobs Act have changed the deductibility of certain expenses – such as home mortgage interest, state and local tax payments, etc. – so you want to make sure you allow yourself enough time to familiarize yourself with the new rules, if you are filing your own return.
If you are working with a tax preparer, you’ll want to make sure you gather all of the appropriate receipts and other important tax documents as soon as possible to give them the adequate time to work on your return.
Don’t miss out on any eligible credits
While many Americans are expected to take advantage of the new, higher standard deduction instead of itemizing their deductions this year, don’t forget to look into any tax credits you might be eligible to claim. Tax credits are more valuable than deductions on a dollar-for-dollar basis since they directly reduce the amount of taxes owed. Some credits are refundable, which means you can get money even if you don’t owe any taxes. The IRS estimates that 20% of taxpayers eligible for the Earned Income Tax Credit won’t claim it. Don’t leave money on the table!
An extension to file is not an extension to pay
If you won’t be able to file your taxes by the April deadline, you may be able to file an extension. But remember that an extension to file is not an extension to pay; you still need to pay your estimated tax bill (with 90% accuracy) to avoid any penalties and interest.
If you can’t pay the full bill, pay as much as you can when you file your extension, and then apply online with the IRS for a payment agreement, or include an Installment Agreement Request with your filing for the outstanding balance.
Attention business owners!
If you are currently maxing out your 401(k) – the 2019 contribution limit is $19,000 per year – you have two additional options to consider. You may want to add a profit-sharing plan that would allow an additional tax-deductible contribution of $56,000.
If you want to go even further, many are unaware that you can add a “cash balance plan” as well. Depending on your age, this would create a potential six-figure deductible contribution. For example, a 49-year-old can contribute $151,000 per year into cash balance plan which would be fully tax deductible. When you add this amount ($151,000) to the 401(k) contribution ($19,000) and the profit-sharing contribution ($56,000), that comes to a total tax-deductible contribution of $207,000! The older you are, the more you can contribute to cash balance plans.
Discover key advice from top investors on tax tips and advantages with a free paperback copy of Unshakeable by Tony Robbins.
Legal Disclosure: Tony Robbins is the Chief of Investor Psychology at Creative Planning, Inc., an SEC Registered Investment Advisor (RIA) with wealth managers serving all 50 states. Mr. Robbins receives compensation for serving in this capacity based on increased business derived by Creative Planning from his services. Accordingly, Mr. Robbins has a financial incentive to refer investors to Creative Planning.
Tony Robbins is an entrepreneur, bestselling author, philanthropist and the nation’s #1 Life and Business Strategist. Author of five internationally bestselling books, including the recent New York Times #1 best-seller UNSHAKEABLE, Mr. Robbins has empowered more than 50 million people from 100 countries through his audio, video and life training programs. He created the #1 personal and professional development program of all time, and more than 4 million people have attended his live seminars.