With the arrival of the New Year it’s time to start thinking about tax filing. The federal government estimates that about 60% of taxpayers use paid preparers to calculate and file their returns. It is never too early to start organizing your receipts, forms and other tax documents. You and your tax preparer will benefit from having all the pertinent information in one place. Remember, last year’s tax return can be a good tool for making sure you aren’t missing anything. Even if you have an accountant that does most of the leg work for you, it is important that you know what is happening with your own tax planning.
Standard or Itemized
It is a good idea to understand the difference between taking the standard deduction and itemizing your deductions. After the big changes in 2018 which increased the standard deduction, you and your accountant should consider whether you will be better off itemizing your deductions or sticking with the standard. In 2019, the standard deduction for a single filer was $12,200 and if you’re married and filing jointly it increased to $24,400. You should discuss with your tax preparer all the possible deductible items you qualify for as well as any tax credits you might be eligible for.
Retirement and Estate Planning
Your tax planning should also take a look at the bigger picture to plan for your retirement and estate planning needs. You want to make sure you are doing the most you can for your retirement funds by contributing as much as you can towards them. Discussing your retirement funding with your investment advisor during your annual portfolio review is a great way to keep on track. If your estate value is less than $11.4 million, you will benefit from the increased exclusion amount for federal estate taxes and your heirs will not need to worry about federal estate taxes after your passing. However, if your estate is close to or more than $11.4 million you may want to consider gifting possibilities to avoid or lessen federal estate taxes.