They say nothing in this world is certain…
Except death… and taxes.
Both are a pestilence, and I couldn’t say which one I dread more.
However, since they’re unavoidable, all we can do is try to mitigate their effects.
Alas, there’s no way to minimize death. Taxes are a different story.
That is why today I want to show you a few ways you can minimize your 2019 tax bill.
These Four Expired Tax Breaks Are Back In Play For 2019
Tax season has officially started, and it brings with it a significant change—a revival of a handful of expired tax breaks.
If you’re a homeowner with private mortgage insurance, for example, you can deduct the premiums paid in 2019 by itemizing them on your tax return.
Moreover, if a lender absolved the mortgage on your principal residence—because of a foreclosure or a short sale—you can exclude up to $1 million of that income for single persons and up to $2 million for couples (yes, the IRS treats canceled mortgage debt as income) on your tax return.
Another item you can deduct is medical expenses, as long as they exceed 7.5% of your adjusted gross income. Note, though, that if you were using HSA (Health Savings Account) funds to pay for those, you don’t qualify for this deduction.
Finally, you can deduct $4,000 in higher-education tuition costs for yourself, a spouse, or dependent children, and there’s no need to itemize this expense to benefit from the tax break.
The 2019 Standard Deduction Limit Increased Significantly, But There Are Ways Around It
Meantime, itemizing deductions this tax season will be much harder.
For 2019, the IRS increased standard deduction limits to $12,200 for single households, $18,350 for heads of households, and $24,400 for married couples filing jointly and surviving spouses.
However, there are still above-the-limit write-offs you can make without having to itemize.
If you’re self-employed, for example, you can deduct retirement plan contributions, along with health insurance premiums.
Furthermore, if you’re paying off a student loan, you can deduct up to $2,500 of the interest paid in 2019.
Finally, if you have children younger than 13, you can deduct child and dependent care expenses up to $1,050 for one kid and $2,100 for two or more.
Reduce Taxes By Investing
Putting money away on the side has many benefits… like helping you retire comfortably, for example.
As it turns out, this practice can also reduce the tax you owe.
When you put money in an individual retirement account (IRA) or a health savings account (HSA), it becomes tax-deductible.
For 2019, you can put up to $3,500 in your HSA for single coverage and $7,000 for a family plan, plus an extra $1,000 if you’re 55 or above.
Furthermore, you can add up to $6,000 to your IRA. Again, you can add an extra $1,000 if you’re 50 years old or older.
When it comes to buying stocks for your IRA, my experience is that companies with long-term value potential perform best. You can check my True Retirement Wealth to access more than 20 top examples right now.
You can deduct both IRA and HSA contributions on your 2019 tax return, but you must put the money in the accounts before April 15.
Also, there’s no need to itemize on your taxes to qualify for this break.
Happy Tax Season,