Top 10 Tax Planning Tips for 2020
Tax season is right around the corner, but good tax planning takes place all year long! See below for some of our favorite tips and tricks. These cover a variety of areas including charitable giving, estate tax exemptions, organizing tax files, and how to treat some payments made to caregivers, household workers, medical providers, and educational institutions.
- Remember to evaluate the benefits of scheduling qualified charitable distributions from your IRAs. These distributions are paid directly from the IRA to a qualified charity. They can satisfy all or part of your required minimum distribution, and the portion transferred to the charity becomes non-taxable.
- Work with your tax advisor to ensure you have a proper amount of withholding taken out of any standard IRA distributions.
- As you make charitable contributions throughout the year, save the documents in one spot; make sure to assign a value to non-cash gifts or to give your preparer a list of items donated.
- Accumulate tax documents in ONE SPOT as they come in the mail.
- 1040-SR, US Tax Return for Seniors, is now available for taxpayers who are 65 or older. It mimics the standard 1040 and has larger fonts. Standard deduction is required.
- This is the second filing season under the Tax Cuts and Jobs Act of 2017, which means we don’t have to work through any big changes. Expect your tax preparer to work on cleaning up and formalizing documentation of any previously new items, especially related to qualified business income (QBI) in general and rental QBI in particular.
- If you are paying caregivers or other household workers as individuals (not businesses), make sure you speak with your CPA about payroll tax reporting requirements if you haven’t already.
- Caregiver payments may be eligible for deduction on Schedule A as medical expenses – but make sure you or your CPA have an annual certification from a licensed health care practitioner on file documenting that the individual using the caregiver is chronically ill.
- Now is a great time to consult your estate planning attorney about planning large gifts. For example, each taxpayer can gift $15,000 per year per recipient without having to file a gift tax return. Also, the estate tax exemption is increasing to $11.58 million per individual this year (up from $11.4 million in 2019).
- Payments made directly to medical providers or tuition payments made to educational institutions on another person’s behalf do not count towards your lifetime gifting limit. Paying your grandchild’s tuition is a great way to make a large gift without having to worry about gift or estate taxes
We wish everyone a smooth, stress-free tax season! If you have questions about our top 10 or other tax matters, please reach out to us. Our team of CPAs and tax and estate planning attorneys serves a wide variety of individuals and businesses.