There are some significant tax changes in 2019 that will affect the tax return you file in 2020. Now is the time to make a plan that allows you to take advantage of these changes. Below is easy access to three links we recommend you read as you plan for the new year.
1. Retirement contribution limits are going up in 2019
As you look at your tax strategy for 2019, keep in mind that retirement contribution limits are going up. You can make additional contributions to your 401(k), 403(b), IRA, most 457 plans, and the federal government’s Thrift Savings Plan. Bankrate has an easy-to-read chart that compares 2018 and 2019 contribution limits. Read more.
2. Consider a “backdoor” Roth IRA to get around income limits for contributions
A Roth IRA differs from other retirement savings plans because you pay taxes on the income used to fund your Roth IRA, whereas traditional IRAs are funded with pre-tax dollars. Due to income limitations, traditional IRA contributions may not be eligible for pre-tax benefits. With a Roth IRA, earnings from contributions to the retirement account and distributions in retirement are tax free. However, there are also income limitations that prohibit Roth IRA contributions. If you are ineligible to contribute toward a Roth IRA, you may be able contribute to a traditional IRA and convert it via a “backdoor” Roth IRA. A “backdoor” Roth IRA may be a strategy to consider as part of your overall tax planning in 2019. It is important to discuss retirement savings strategies with your financial planner. Read more.
3. Inflation adjustments and tax tables for 2019
Many deductions, credits, exemptions, and thresholds will increase in 2019—another important change to be aware of as you plan for the year ahead. Read more.
Please consult with a trusted advisor about how you can benefit from these changes, and to ensure you’re prepared for your own retirement.