As 2018 is rapidly drawing to a close, and a New Year 2019 is about to begin, it’s time to make important tax-related moves to manage your finances. The start of a new year is the perfect time to begin thinking strategically about taxes. India’s First Financial Advisory Portal, MoneyMindz advices you with 4 active tax moves towards a convenient tax planning. Here are these simple steps to be followed:
Figure out whether you’ll take the standard deduction or itemize
Tax filers have two options when preparing their returns: They can itemize their deductions or take the standard deduction dictated by the Internal Revenue Service. In 2018, the standard deduction nearly doubled from what it was the previous year, and in 2019, it’s going up again to Rs 12,200 for individuals and Rs24, 400 for married couples filing jointly. As such, a large number of filers are less likely to itemize on their returns given these increased limits.
Now, if you expect your itemized deductions to total Rs 10,000 in 2019 and you’re a couple filing jointly, you can write off the idea of itemizing, since claiming the standard deduction will be a no-brainer. But if you find that you’re on the fence when you sit down to do your 2018 taxes, you might consider bunching some deductions in 2019 so that itemizing makes sense that year.
Check your withholding
Most people didn’t update their tax withholding in 2018 despite the fact that the IRS has been urging filers to do so following the massive tax overhaul that took effect earlier in the year. Why is this problem? The purpose of withholding is to pay the IRS its share of your earnings throughout the year so that you don’t owe too much come tax time. At the same time, you don’t want to overpay your taxes during the year and give the IRS too much of your money up front, because in doing so, you lose the ability to use that money when you might need it. But by not checking your withholding, you’re risking either scenario, and that’s just not great for your finances either way.
Figure out if your first required minimum distribution is due
If you have retirement savings in a tax-advantaged plan other than a Roth IRA, required minimum distributions (RMDs) are, unfortunately, something you need to worry about. The IRS doesn’t want seniors’ retirement savings to sit and grow in a tax-advantaged fashion indefinitely, and so once you turn 70 1/2, you’re required to start removing a portion of your account each year (that amount is based on your account balance coupled with your life expectancy). Normally, RMDs are due by Dec. 31 each year, but if you turned or are turning 70 1/2 at any point in 2018, you’ll need to take your first one by April 1, 2019. Mark that date on your calendar if it applies to you, because if you fail to take your RMD in time, you risk forfeiting 50% of that amount to the IRS.
Evaluate your portfolio
December has been a volatile month for the stock market, so if you have investments, there’s a good chance you’ve been seeing some losses on paper in recent weeks. And while you don’t want to act too hastily by liquidating your holdings and taking too many actual losses, a few losses might do you some good early on in the coming year. That’s because those losses can be used to offset gains, so if the market picks back up over the course of 2019 and you’re able to make money on other investments, you can use your losses to offset those gains. You can also apply up to Rs 3,000 worth of losses to offset your ordinary income, so if you’re getting a raise in 2019, taking an investment loss is a good way to cancel out some of its potentially negative tax implications. Therefore, if you evaluate your portfolio and determine that some of your stocks are underperforming, it might make sense to unload them early on in the year.
MoneyMindz, Financial Advisory Portal believes that it is every responsible citizen’s duty to pay taxes on time and follow a proper tax-planning strategy. We are putting an effort to guide every individual towards a convenient tax-planning and helping everyone plan a secured financial future.
For more information visit www.moneymindz.com or give a missed call to 022-62116588.