Leave a comment

4 Tax Saving Strategies for Clients

The 2019 tax season is here, and while many Americans are still focused on figuring out their 2018 taxes, it is never too early to plan for 2019. Below are four tax tips that could be useful to your clients, whether they are trying to maximize a refund or minimize what they owe.

Contribute to a Retirement Plan

Contributing to an Individual Retirement Account (IRA), 401(k) or other type retirement plan is a great way to reduce taxable income for clients. The Internal Revenue Service (IRS) allows individuals to contribute up to $6,000 (increased from $5,500 in 2018) per year to an IRA and up to $19,000 into a 401(k). If your client is age 50 or older, they can contribute up to $7,000 per year into an IRA and $25,000 into a 401(k). These contributions are tax-deferred, so they can be deducted from your client’s taxable income. Keep in mind individuals can only contribute to an IRA if they have earned income, though the IRS does allow a working spouse to contribute to an IRA on behalf of a nonworking spouse. There are contribution limits if your client is already contributing to another retirement plan like a 401(k), and there is usually a 10 percent penalty if the money is taken prior to age 59½. Individuals cannot make IRA contributions after age 70½. Individuals have until April 15, 2019 to contribute to an IRA for tax year 2018 and April 15, 2020 for tax year 2019.

Harvest Tax Losses

Losing money on investments is never the goal, but if your clients have losses in 2019, they can be used to offset gains for the year. If you have greater realized capital losses than gains, you can also use up to $3,000 per year to offset ordinary income. Any losses greater than $3,000 can be carried over to future years. While tax loss harvesting is a useful tool to offset short- and long-term gains and reduce taxable income, make sure your clients understand which investments they are planning to sell and what impact the sale will have on their portfolio and investment goals. If they decide to implement this strategy, it is also important to understand the IRS wash-sale rule, which prohibits investors from deducting losses from sales or trades and then rebuying the security or a substantially identical stock or security within 30 days of the sale.

Maximize Medical Expenses

Beginning in 2019, taxpayers can deduct unreimbursed medical expenses that exceed 10 percent of their adjusted gross income. Deductible qualified medical expenses include, but are not limited to, medical treatments, surgery, preventative care, prescriptions and dental and vision care. If your client decides to deduct medical expenses, they will not be able to take the standard deduction, so it is important to understand they should only claim the medical expenses deduction if it is greater than the standard deduction. For 2019, the standard deduction is $12,200 for single a single person and $24,400 for a married couple.

Make a Charitable Contribution

Individuals may be able to donate or gift up to 60 percent of their adjusted gross income and receive a tax deduction. There are several ways to see tax benefits from donating to charity. Individuals who are age 70½ must begin taking required minimum distributions (RMDs) from their IRAs and 401(k) plans each year. These distributions generally count as taxable income, but if a distribution is donated as a qualified charitable distribution and paid directly to a qualified charity, the individual can avoid paying taxes on the RMD. Another way to maximize the benefits of donating to charity is to donate appreciated stock. If your client has a stock that has appreciated over time, they will have to pay taxes on that growth when they sell the stock, even if they donate the proceeds to charity. By donating the stock directly to a charity, they can avoid paying the capital gains on the stock, they can still take the deduction, and the charity will receive the full value of the donation.

Dennis Culver is a paraplanner with Insight Wealth Strategies.


Insight Wealth Strategies, LLC is a Registered Investment Adviser. Advisory services are only offered to clients or prospective clients where Insight Wealth Strategies, LLC and its representatives are properly licensed or exempt from licensure. Past performance is no guarantee of future returns. Investing involves risk and possible loss of principal capital. No advice may be rendered by Insight Wealth Strategies, LLC unless a client service agreement is in place.