2019 Planning Ideas
By Saghir Aslam
Rawalpindi, Pakistan
(The following information is provided solely to educate the Muslim community about investing and financial planning. It is hoped that the Ummah will benefit from this effort through greater financial empowerment, enabling the community to live in security and dignity and fulfill their religious and moral obligations towards charitable activities)
When it comes to tax planning, procrastination can be costly; the deadline for implementing most investment-related strategies to potentially help reduce your tax bill for this year is December 31, 2019.
Number of valuable tips you may be able to implement before the year ends to help reduce the amount you send to IRS and improve your overall financial picture.
Here are some highlights of these new tax laws that apply to individual taxpayers:
- New top tax rate of 37% (reduce from 39.6%)
- Larger standard deduction, $24,000 (joint) or $12,000 (single)
- State and local tax deduction limited to $10,000
- Mortgage interest deduction allowed on new acquisition or home improvement loan balances up to $750,000 (reduced from $1,000,000), applies to debt incurred after December 15, 2017
- Mortgages interest deduction is no longer allowed on loans used for something other than to buy, build, or improve a qualified home
- 2% miscellaneous itemized deductions, which include investment advisory fees, are no longer deductible
- New deduction created for pass-through businesses (partnerships, S corporations, limited liability companies, and sole proprietorships) of up to 20% of qualified business income subject to certain exceptions.
As year-end approaches and you start thinking about coming year too, estimate your income and deductions so you may make informed decisions. Here are some tax planning questions to consider that may help reduce your tax bill in the new tax environment.
- Should you defer or accelerate income such as compensation, gain from sale of property or business, etc.?
- Should you defer or accelerate itemized deductions such as medical or charitable?
- Is your business entity still the best choice under the new tax laws?
- Would there be added benefits for your business to having employees rather than independent contractors, to purchasing equipment rather than leasing it, or for separating certain business activities into separate entities? These items may impact your eligibility for the new deduction for qualified business income.
- Claiming accelerated deductions for equipment purchases may reduce your taxable income today, but how does it impact the use of other deductions under the new tax laws?
Looking forward, Congress is considering additional tax reform on the following topics:
- Making recent tax changes permanent s
- Providing additional tax benefits related to health care
- Changing certain retirement plan rules
- expending the definition of qualified expenses for 529 plan distributions
With this increased activity in tax legislation, it will be important to communicate throughout the year with your tax and legal advisors as well as your advisor in order to take advantage of whatever opportunities may raise.
(Continued next week)
(Saghir A. Aslam only explains strategies and formulas that he has been using. He is merely providing information, and NO ADVICE is given. Mr. Aslam does not endorse or recommend any broker, brokerage firm, or any investment at all, nor does he suggest that anyone will earn a profit when or if they purchase stocks, bonds or any other investments. All stocks or investment vehicles mentioned are for illustrative purposes only. Mr. Aslam is not an attorney, accountant, real estate broker, stockbroker, investment advisor, or certified financial planner. Mr. Aslam does not have anything for sale.)
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