Reduce Your Taxes for 2020 Right Now

 You have a month to take action. What should you do? See below for some ideas:

1. Make cash contributions to charities. You can offset 100% of your adjusted gross income this year with cash contributions instead of just 60% as in prior years.

2. Sell stocks that have losses to offset your capital gains. 

3. Do not take a distribution from your retirement plan this year. Required minimum distributions are not required for 2020.

4. Consider an opportunity zone fund investment to defer capital gains for 6 years.

5. Consider setting up a donor advised fund to concentrate your donations this year so you can itemize. 

6. Contribute to a Georgia Path2College 529 plan for your children's education. The state deduction is $4,000 per beneficiary for single returns and $8,000 per beneficiary for joint returns. 

7. Increase your employee 401k contribution to the maximum of $19,500.

8. Consider oil and gas investments and section 181 film investments.

9. If you have earned income, maximize your retirement plan contributions. You can contribute a maximum of $6,000 to an IRA and $7,000 if you are age 50 and above. If your income is above certain thresholds, your deduction may be limited.

10. Delay mailing bills to your customers until late December so you won't get payments until January if you have a cash basis business.

11. Make donations of household goods and clothing to Goodwill.

12. Buy office supplies, equipment, stamps, and software for your business.

13. Consider getting a mileage app like Mile IQ or a mileage log to document your business mileage. Undocumented business mileage will be rejected upon an IRS audit. 

14. Check to make sure all of your 2020 quarterly estimated tax payments have been made. The final one is due January 15, 2021.

15. Organize your tax documents in one file folder for 2020. Complete the tax organizer which will be sent to you soon. Summarize business expenses, cash donations under $250, medical expenses, and rental expenses and put amounts on the organizer. Keep the receipts at home. 

Qualified Dividends

 Qualified dividends are taxed at the favorable long term capital gains rates instead of the ordinary income tax rates. The reduced tax rates apply to dividends from domestic corporations and certain qualified foreign corporations. Also there is a 61 day holding period requirement for the stock to be held  in the 121 day period beginning 61 days before the ex-dividend date. 

Tax Organizer for 2020

I am working on my tax organizer for this year which I hope you will use. I plan to email these to all my clients by January 15, 2021. If you would prefer to get the organizer by regular mail, please let me know. 

Social Security

When should you sign up to receive your social security benefit? You can sign up to receive social security benefits as early as age 62. Your payment increases every month you wait up until age 70, and then then there is no benefit to any further delay. Those born between 1943 and 1954 can get 8% more each year they wait from age 66 to age 70 for a maximum social security benefit of 132% of their full retirement benefit. How many people delay until age 70? According to the Center for Retirement Research at Boston College, only 4 percent of women and 2 percent of men wait until age 70. I believe you should wait and collect the maximum benefit if you are in reasonably good health and don't need the extra money for living expenses.