While the year is still young, there are several steps to consider to make 2019 a better year financially.
Make gifts to younger family members — You can give up to $15,000 annually to as many people as you wish, gift tax free. By giving early in the year, you’ll shift the income from your higher tax bracket. Consider giving stock or other assets that are likely to appreciate.
Switch to tax-exempt income — One way to reduce your overall income tax burden is to invest in tax-free municipal bonds. Although the interest is lower than that offered on commercial bonds, the tax savings make munis attractive, especially for taxpayers in higher tax brackets. The earlier in the year you convert, the greater your tax savings.
Check your withholding and estimated tax payments — Make sure you’re paying in enough to the IRS through withholding and estimated payments to avoid a penalty, but don’t overpay. Remember: A big tax refund next year is really an interest-free loan to the IRS.
Review your insurance coverage — Make sure the policies you have are sufficient, without providing unnecessary coverage. You might want an umbrella policy that offers insurance beyond that available through regular homeowners and auto policies. If you find you have life insurance that is no longer needed for family security, consider giving the policy to charity. You’ll be entitled to a charitable deduction if you itemize.
Contribute to retirement plans — For 2019, the maximum contribution to an IRA is $6,000, with an additional catch-up of $1,000 for those age 50 or older. The limit for 401(k) plans is $19,000, with a catch-up of $6,000.
Review your investments — Check with your investment advisor whether your portfolio is in balance, particularly in light of recent stock market gyrations. If you have stock that has appreciated in value, consider a gift to charity. You’ll avoid the capital gains tax and may be entitled to a charitable deduction. There are even ways to retain payments for life from your gift.