With the tax deadline extended to Wednesday, July 15th, you still have time to reduce your tax bill. Here are three simple tips to help.
1. CONTRIBUTE TO AN IRA
You have until July 15th this year to make Traditional or Roth contributions for 2019.
IRA contributions can be made to a Traditional or Roth account, even if you already contribute to a 401(k) or other employer plans. The contribution limits for 2019 are $6,000 if you are under 50 and $7,000 if you are over 50. The ability to deduct the contribution from your taxable income is based on whether or not you contribute to an employer plan, as well as your income. Even if you can’t deduct the contribution, you can still make a nondeductible contribution.
What if your spouse doesn’t have earned income?
You can still make a contribution to a Traditional or Roth contribution based on your own earned income.
2. CONTRIBUTE TO A TEEN’S OR YOUNG ADULT’S IRA
If you have a teen or young adult who had jobs generating W-2’s for 2019, you could make an IRA contribution that helps them in three ways.
- For 2019, single filers who make $32,000 or less and contribute to an IRA can get a tax credit worth up to $1,000.
- Contributions made to Traditional IRAs reduce taxable income, and your teen/young adult is eligible to contribute a maximum of $6,000 per year to their Traditional or Roth IRA. Any amount contributed to a Traditional IRA reduces the tax bill. For example, if your teen made $6,000 over the summer and made a $3,000 Traditional IRA contribution, they will only pay taxes on $3,000.
- If your young adult needs to purchase medical coverage through a state insurance marketplace, making an IRA contribution can qualify them for a larger health insurance premium tax credit. In order to get the credit, the IRA contribution must be made by the July 15th deadline.
3. MAXIMIZE YOUR HSA
If your health coverage for 2019 was considered a high-deductible insurance plan, you can still contribute to an HSA and have it count towards your 2019 taxes. The IRS defines a high-deductible health plan as any plan with a deductible of at least $1,350 for an individual or $2,700 for a family.
HSAs are the only vehicle that reduces your tax when you make the contribution and offers tax-free distributions when you use the funds for qualified health expenses for you and your family. HSA contribution limits for tax year 2019 are $3,500 for an individual and $7,000 for a family. If you’re 55 or older, you can add $1,000 to these limits.
For questions or more information on how you can use your IRA or HSA account to reduce your tax bill this year, contact Midland by visiting www.midlandtrust.com or calling 239.333.1032.
MIDLAND TRUST IS NOT A FIDUCIARY: Midland’s role as the custodian of self-directed retirement accounts is non-discretionary and administrative in nature. The account holder or his/her authorized representative must direct all investment transactions and choose the investment(s) for the account. Midland has no responsibility or involvement in selecting or evaluating any investment. Nothing contained herein shall be construed as investment, legal, tax, or financial advice or as a guarantee, endorsement, or certification of any investments.