16 Year-End Financial Planning Tips from the AICPA

December 5, 2019 GMT

NEW YORK--(BUSINESS WIRE)--Dec 5, 2019--

As 2019 comes to an end, so does the window of opportunity to take advantage of certain tax and financial planning strategies. To help Americans be best positioned come Tax Day 2020, CPA financial planners with the American Institute of CPAs (AICPA) share the following 2019 year-end tips. For members of the media, the AICPA has financial planning and tax experts ready to assist with stories helping Americans understand the proactive financial decisions they can make before the end of the year.

1. Prepay Real Estate Taxes on A Residence to Obtain A Discount
Deadline: December 31, 2019
Quote: “In the past, prepaying real estate taxes could trigger the alternative minimum tax (AMT), but with a generous AMT exemption and a cap on deducting state and local taxes, AMT concerns are minimal. By prepaying real estate taxes in 2019 that are otherwise due before the end of 2020, taxpayers can get a discount on the 2019 taxes.” - Sidney Kess, CPA member of the AICPA Personal Financial Planning (PFP) Executive Committee

2. Protect Your Gains from Taxes by Leveraging Your Losses
Deadline: December 31, 2019 or sooner
Quote: “Review your investment portfolio before the end of the year to see what Long Term Capital Gain Dividend distributions have already hit the account and check to see if there will be any others to come before year end. If you don’t proactively consider these capital gains, you may be in for a big surprise this upcoming tax filing season. One way to protect your gains is by selling selected losing investments in your portfolio now. This is known as Tax Loss Harvesting and will help to lower your potential tax hit.” - Michael Eisenberg, CPA/PFS member of the AICPA Financial Literacy Commission

3. If You Go Green, Don’t Forget to Save Green
Deadline: December 31, 2019
Quote: “Taxpayers who upgraded their homes to make use of solar or certain other renewable energy in 2019 may be eligible for a tax credit of 30 percent to offset some of the costs. For those who are into renewable energy but haven’t had the work done yet, it may be too late to book an installer for 2019. Be aware that the solar credit reduces from 30 percent to 26 percent from 2019 to 2020. Though less, 26 percent is still a good rate. If you are going to miss the 2019 deadline, act now and reduce your 2020 taxes!” - Mackey McNeill, CPA/PFS member of the AICPA Consumer Financial Education Advocates

4. Pull the trigger on those much-needed home business purchases
Deadline: December 31, 2019
Quote: “Many taxpayers have side gigs these days and can expect to pay both income and self-employment tax on those net profits in April. So, if you have expenses related to your business that need to be paid, do it before year-end to offset any current taxable income. Driving for a rideshare company? Maybe you have been eyeing some slick seat covers or gadgets, now is the time to invest.” – Cari Weston, CPA, CGMA Director of Tax Practice & Ethics at the AICPA

5. Check Your Withholdings
Deadline: Make it routine.
Quote: “The Tax Cuts & Jobs Act of 2017, and the resulting changes in the withholding tables in 2018, surprised many Americans on Tax Day last year because they had not withheld enough from their paychecks during 2018. It is important to check your tax withholdings regularly. If you feel more or less tax should be withheld, contact the Payroll/Human Resource Office at your employer and complete a new W-4 Employee’s Withholding Allowance Certificate. You can use line 6 of the W-4 to have extra federal tax withheld from each paycheck prior to the end of the year. Just remember to complete another form January 1, 2020 to remove the adjustment if you don’t want it to continue!” - Paula McMillan, CPA/PFS member of the AICPA Personal Financial Specialist (PFS) Credential Committee

6. Start Saving Early for Education with 529 education-savings contributions
Deadline: Check with your state. Most states it is December 31, 2019, although for a few it is April 15, 2020
Quote: “With more options available for using 529 plans, taxpayers could consider contributing additional funds to existing accounts (while keeping in mind gift tax implications) or setting up new 529 plans. Although contributions are not eligible for a federal income tax deduction, many states offer state income tax deductions. Contributions to these accounts can grow tax-free, and withdrawals used to pay eligible expenses are also tax-free.” - Dave Cherill, CPA member of the AICPA PFP Executive Committee

7. Bunch Charitable Contributions
Deadline: December 31, 2019
Quote: “For taxpayers who are planning to utilize the standard deduction instead of itemizing, consider bunching your charitable contributions into alternate years if it will allow you to take the standard deduction one year and itemize an amount that exceeds the standard deduction the next. If you do not want to give the money to charity all at once, contribute to a donor advised fund and then make the distributions to charity over time.” - Lisa Featherngill, CPA/PFS member of the AICPA PFP Executive Committee

8. Donate Your Required Minimum Distribution Strategically
Deadline: December 31, 2019
Quote: “For taxpayers age 70 1/2 or older who need to withdraw their required minimum distribution (RMD) from their IRA, they may consider utilizing a Qualified Charitable Distribution (QCD) of up to $100,000 to one or more qualified charitable organizations. This distribution counts toward satisfying their RMD and will not be taxable to the taxpayer. This strategy lowers a taxpayer’s adjusted gross income (AGI) which may allow for larger deductions that are subject to AGI limitations, such as medical deductions and charitable contributions. Also, this allows for a reduced amount of income in computing the amount of Medicare Part B premiums.” - Tom Pope, CPA member of the AICPA PFS Credential Committee

9. Max Out That Health Savings Account
Deadline: April 15, 2020
Quote: “One way to lower your taxes is to put the maximum allowed in your HSA (generally $3,500 for individual coverage or $7,000 for family) even if you haven’t gotten there yet through your payroll deductions. You actually have until the April tax filing deadline to make a direct deposit to your HSA from your checking account, then deducting the deposit on your tax return. Remember that HSA dollars carry over indefinitely and are yours even if you switch jobs or retire, so if you have the funds, make the most of this tax savings opportunity to also save for future healthcare costs.” - Kelley Long, CPA/PFS member of the AICPA Consumer Financial Education Advocates

10. Maximize Employer 401(k) Match Opportunities
Deadline: Deferred from last paycheck or December 31, 2019
Quote: “If your employer offers a 401(k) match, whenever possible, everyone should find out what the limit is, then contribute at least the amount required to get the maximum match. The result is that you will have free pre-tax employer contributions at the end of the year. If you haven’t been contributing to your 401(k) plan at work at a level that gets you the maximum employer match, check on whether there may be a ‘catch up’ opportunity before year end. Leaving this benefit underutilized is the same as leaving money on the table.” - David Desmarais, CPA/PFS member of the AICPA PFP Executive Committee

11. Maximize Roth Opportunities
Deadline: April 15, 2020
Quote: “Don’t overlook the opportunity to fully utilize the power of Roth to build family wealth by making all allowable contributions for family members with earned income including children, grandchildren, and even parents. Starting a Roth account as young as possible allows for many years of tax-free growth which occurs when you’ve had a Roth IRA for at least 5 years and earnings are not withdrawn until after age 59 1/2. If you haven’t reached the limit for the year, it might make sense to increase your contributions in order to take full advantage of this year’s opportunity to put away retirement savings dollars.” - Brooke Salvini, CPA/PFS member of the AICPA PFP Executive Committee

12. Winter breaks may mean expensive kid camps... prepay to save on taxes
Deadline: December 31, 2019
Quote: “The cost of childcare for certain taxpayers can result in a childcare tax credit. If you qualify, don’t forget to include the cost of summer or winter camps if they are day camps and used so the parents can attend work or school.” – Cari Weston, CPA, CGMA Director of Tax Practice & Ethics at the AICPA

13. Gift to Heirs Today to Reduce Future Estate Tax
Deadline: December 31, 2019
Quote: “The year-end is a great time to make annual exclusion gifts. For those looking to reduce their estate tax exposure, individuals can give up to $15,000 to an unlimited number of beneficiaries per year without decreasing their lifetime estate tax exclusion amount or paying a gift tax. These planning opportunities will be lost once the year ends and should be top of mind to review now.” - Robert Westley, CPA/PFS member of the AICPA Financial Literacy Commission

14. Plan for Today, Tomorrow and Beyond with Multi-Year Tax Projection
Deadline: December 31, 2019 + reassess annually
Quote: “Tax projections should be prepared for the current year and at least 1 additional year. This allows you to make decisions about when to time deductions (e.g., should you bunch charitable deductions now or wait), as well as plan income in order to maximize opportunities like the Qualified Business Income deduction or Qualified Opportunity Zone program.” - Lisa Featherngill, CPA/PFS member of the AICPA PFP Executive Committee

15. Consider Roth IRA Conversion
Deadline: December 31, 2019
Quote: “The Roth IRA conversion continues to be an effective planning measure for certain taxpayers. Converting assets from ‘traditional to Roth’ creates tax free income in retirement, or for future generations. Although the new tax law does not affect conversions to a Roth IRA, it did end the ability to re-characterize a conversion after the fact. With lower marginal tax rates (currently) in place, this provides an opportunity for taxpayers to convert all (or a portion of) their traditional IRAs today.” - Dave Cherill, CPA member of the AICPA PFP Executive Committee

16. Self-employed with extra cash? Why not establish a retirement plan for yourself and employees?
Deadline: December 31, 2019 setup for certain plans, return due date for others
Quote: “If you are self-employed and find yourself with some extra cash this year or are just interested in setting money aside for yourself or your staff, talk to a CPA financial planner today about your options. Some plans must be in place by December 31 but can be funded into 2020 while still receiving a tax benefit on your 2019 return.” – Cari Weston, CPA, CGMA Director of Tax Practice & Ethics at the AICPA

These tips can help Americans improve their financial situation, support the lives they want to live and ensure their loved ones are provided for. To speak to a CPA financial planner for stories to help Americans make positive financial moves, members of the media may contact Jon Lynch jonathan.lynch@aicpa-cima.com (212) 596-6033.

About the American Institute of CPAs

The American Institute of CPAs (AICPA) is the world’s largest member association representing the CPA profession, with more than 429,000 members in the United States and worldwide, and a history of serving the public interest since 1887. AICPA members represent many areas of practice, including business and industry, public practice, government, education and consulting. The AICPA sets ethical standards for its members and U.S. auditing standards for private companies, nonprofit organizations, federal, state and local governments. It develops and grades the Uniform CPA Examination, offers specialized credentials, builds the pipeline of future talent and drives professional competency development to advance the vitality, relevance and quality of the profession.

About the Association of International Certified Professional Accountants

The Association of International Certified Professional Accountants (the Association) is the most influential body of professional accountants, combining the strengths of the American Institute of CPAs (AICPA) and The Chartered Institute of Management Accountants (CIMA) to power opportunity, trust and prosperity for people, businesses and economies worldwide. It represents 657,000 members and students across 179 countries and territories in public and management accounting and advocates for the public interest and business sustainability on current and emerging issues. With broad reach, rigor and resources, the Association advances the reputation, employability and quality of CPAs, CGMAs and accounting and finance professionals globally.

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SOURCE: American Institute of CPAs

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PUB: 12/05/2019 07:00 AM/DISC: 12/05/2019 07:01 AM