2019 Planning Ideas – 2
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)
Capital losses may offset capital gains:
• Include year-end, long-term capital gain distributions from mutual funds when estimating your 2019 gains.
• Determine if you can take advantage of the 0% long-term capital gain tax rate.
• Sell by year-end to realize losses. If you want to repurchase the position, talk with your Financial Advisor about strategies that may help avoid a wash sale (the purchase of a “substantially identical” security within 30 days). Wash sales reduce the amount of loss you are able to claim in the current tax year. Also, pay attention to potential dividend or capital gain distribution reinvestment that could create a wash sale.
• Review portfolio periodically throughout the year. Do not wait until the end of the year to harvest any capital losses.
• The last day to double up your position (purchase replacement shares ahead of the sale establishing the loss) and still claim a 2019 tax loss (without triggering a wash sale) is Friday, November 30, 2019.
• If your capital losses exceed your capital gains, you may use up to $3,000 to reduce other types of taxable income each year and carryover the remainder.
Charitable gifts
Give gifts to help increase deductions:
• Generally, contributions to charities must arrive by calendar year-end.
• For gift fund contributions, the account must be open and deposit completed before calendar year-end to qualify as a 2019 gift.
• For 2019 the standard deduction amounts have increased causing the threshold for itemized your deductions to increase as well. If your itemized deductions are less than standard deduction, your charitable contributions are not deductible. Evaluate bunching a couple years’ worth of charitable contributions into the current year. This may increase your itemized deductions above the standard deduction threshold so you can receive a tax benefit for those gifts.
• Evaluate the tax benefits of gifting long-term appreciated stock versus cash.
• If you are age 70 ½ or older, consider the potential benefits of a qualified charitable distribution (QCD)> A QCD allows you to gift directly from your IRA up to $100,000 per year to qualifying charities. QCDs count towards satisfying you RMD without the federal tax consequences of being included in your adjustment gross income (AGI).
Develop a strategy early for managing company stock benefits:
• Exercising incentive stock options (ISOs), nonqualified stock options (NSOs), or restricted stock grants could have significant tax consequences, including alternative minimum tax (AMT) implications.
• For many taxpayers, the reduced tax rates will offer some tax rates will offer some tax relief. However, the current rates are set to expire at the end of 2025. This may be an opportunity to exercise your options at a lower rate. Review the expiration period on your employer stock options and work with your tax advisor before year-end to develop a tax-efficient, near-term and long-term strategy.
To be 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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