Year-end tax plan for 2019

Part 1 of 3

THE Tax Cuts and Jobs Act made significant changes to income tax rates and traditional deductions. Let’s look at 10 tips on how those changes affect tax plans for this year ending December 31, 2019. This is the first of a three-part series.

1. Determine if itemizing deductions still works for you

More taxpayers have shifted away from itemized deductions to standard deduction. There are good reasons for this shift. Recent law doubles the standard deduction to $24,400 for married couples filing jointly and $12,200 for single filers in 2019. It also places new limits on itemized deductions, including a $10,000 cap on property and state and local income tax deductions. This is a windfall offering for taxpayers without home mortgage interest deductions. It also simplified tax preparation. This is tax simplification at its best.

2. Make tax-free gifts

You can give gifts up to $15,000 per year ($30,000 for a married couple who elect to split gifts) without reporting it to the IRS. A gift reduces your estate which will no longer pay estate taxes on such gifted amounts. Bonus: The gift will not be considered taxable income for the donee (recipient). Nice.

The lifetime federal gift and estate tax exemption doubled to $11.40 million for individuals ($22.80 million for married couples). This means that fewer estates will owe estate tax.

3. Donate appreciated stocks to charity

If you itemize deductions on Schedule A, charitable gifts such as cash or appreciated stock, are still tax-deductible. Consider giving several years’ worth of gifts into a donor-advised fund (DAF) for a single year. This fund allows you to spread out deductions over the next several years as you need them to maximize tax benefits of charity giving.

This would be ideal for a retiree with significant assets and modest living expenses. Pardon me but that wouldn’t be you or me. Such taxpayers can now deduct cash charitable contributions of as much as 60% of their adjusted gross income (was 50%). That wouldn’t be you or me either. Sorry.

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Victor Santos Sy graduated Cum Laude from UE with a BBA and from Indiana State University with an MBA. Vic worked with SyCip, Gorres, Velayo (SGV – Andersen Consulting) and Ernst & Young before establishing Sy Accountancy Corporation.

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He retired after 50 years of defending taxpayers audited by the IRS, EDD, BOE and other governmental agencies.  He published a book on “How to Avoid or Survive IRS Audits.” Readers may email tax questions to vicsy@live.com.

Victor Sy, CPA, MBA
Victor Sy, CPA, MBA

Victor Santos Sy graduated Cum Laude from UE with a BBA and from Indiana State University with an MBA. Vic worked with SyCip, Gorres, Velayo (SGV - Andersen Consulting) and Ernst & Young before establishing Sy Accountancy Corporation. He retired after 50 years of defending taxpayers audited by the IRS, EDD, BOE and other governmental agencies. He published a book on “How to Avoid or Survive IRS Audits.” Readers may email tax questions to vicsy@live.com.

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