By now, many of you have completed your 2018 Tax Returns or have filed for an extension. Were you surprised by any results of your tax return? Did you get a larger than expected refund? Did you owe more taxes than expected?
Now’s the time to make sure you are in good shape for 2019.
Here are a few things to review:
Review all your retirement plan options.
If you are in a higher tax bracket, maximizing your retirement plan deferrals may be a benefit to minimize taxes. Also, make sure you are taking full advantage of any free money from employer matching.
Do you have an HSA option?
HSA plans can be used to pay for medical expenses but can also grow tax deferred to help pay for medical expenses in retirement, unlike an FSA account. After age 65, withdrawals do not have to be used solely for medical expenses. The money deposited into an HSA account also avoids Social Security & Medicare Taxes. It’s estimated that at retirement, individuals will likely have over $260,000 in out-of-pocket medical expenses and even higher for couples.
Are you going to turn 70 ½ this year?
If you are turning 70 ½ and will be taking a Required Minimum Distribution, make sure you have planned for the additional income and that you are adjusting your tax deductions so that you don’t have a bad surprise at the end of 2019.
Make sure to coordinate with your Tax Advisor and Financial Planner. You may have some extra deductions that are not available to someone that is not self-employed.
If you are helping to save for children's or grandchildren's education, make sure that you are taking advantage of the deductions and deferral opportunities available. Make sure to review eligibility limits to determine if you are eligible for any Maryland tax benefits.
Is your investment portfolio tax efficient?
Depending on when you need income from your portfolio and your current tax bracket, be sure to review whether your portfolio is set up to best benefit you on an after-tax basis. During the growth years of your portfolio, capital gains taxes are typically less expensive than income tax brackets. Compare tax free bonds to taxable bonds to see which gives you the best after tax benefit. Equity markets have been experiencing regular volatility lately. This create opportunities for tax loss harvesting that may help to reduce taxes from your portfolio.
These are just a few ideas to help you reduce your taxes and to be more tax efficient. Financial planning involves a lot of moving parts. Oxford Planning Group is here to help our clients simplify their finances and to help increase our clients’ long-term financial success.