Smart Tax Planning

Tax Day is now 3 months away. Here are 3 tax savings opportunities

Key Points
  • Federal income tax returns would have been due today, but the Treasury has pushed the deadline to July 15.
  • That means there’s still time for last-minute tax savings.
  • Got a few bucks lying around? Contribute to your health savings accounts and IRA for the 2019 tax year.

It's April 15, and while federal income tax returns don't have to be in today, there are still a few savings opportunities if you know where to look.

In light of the coronavirus, the U.S. Treasury Department and the IRS moved Tax Day to July 15, giving individuals 90 more days to file their 2019 returns and pay any taxes owed.

That also means if you haven't filed your tax return yet, you have three more months to strategize on the best ways to save.

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"Making contributions toward IRAs and health savings accounts is always a good suggestion," said Thomas Neuhoff, CPA at Henry & Peters in Tyler, Texas. "The deadline would normally be today, but now it's through July 15."

Be aware that while the federal deadline has moved, you should check with your state to see whether due dates for state tax returns have changed. The American Institute of CPAs is maintaining a list of what states are doing here.

Here are a few suggestions to consider as you pull together your 2019 tax return.

Boost retirement savings

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If you're lucky enough to have a few extra dollars lying around, consider redirecting the funds toward your individual retirement account for the 2019 tax year – as long as you contribute by July 15.

Savers can put away up to $6,000, plus $1,000 if they're 50 and over into an IRA. That's the total amount you can apply toward traditional and Roth IRAs for 2019.

Depending on your adjusted gross income and whether you have a retirement plan at work, you can also take a tax deduction for your traditional IRA contribution.

Remember, there are no deductions for Roth IRA contributions, but you can use the money tax free in retirement.

Ramp up health savings

Here's how to get the most tax benefits out of a health savings account

For 2019, health savings accounts allow you to put away up to $3,500 if you have self-only coverage in a high-deductible health insurance plan. You can boost that amount to $7,000 if you have family coverage. 

Add another $1,000 if you're 55 and over. You have until July 15 to put this money into your HSA and have it count for last year.

By putting money into an HSA, you save taxes in the present and future. Contributions are either pretax or tax-deductible, and they grow free of taxes in the account. Tap the money tax-free for qualified medical expenses.

Know your extenders

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Toward the end of 2019, lawmakers voted to resurrect a pack of expired tax breaks that are known as "tax extenders."

Take the extra time to hunt down a few receipts and statements and see what you can claim. Those on the table for the 2019 tax year include the following:

  • A $4,000 deduction for tuition and fees if you have a child who's in college. You don't have to itemize deductions to claim this.
  • Private mortgage insurance that you paid last year. These are the so-called "PMI expenses" you pay when your original down payment is less than 20% of the sales price. This is an itemized deduction.
  • Medical expenses. You can claim medical expenses that exceed 7.5% of your adjusted gross income. This threshold was supposed to rise to 10% after 2018, but the extenders package kept the deduction at 7.5% of AGI. You must itemize deductions to claim this write-off.
  • Short-sale and foreclosure. If your lender canceled or forgave the loan on your principal residence, there's a tax extender that allows you to exclude up to $2 million (if married) from your gross income for discharge of the debt.

Normally, the canceled debt is treated as income and subject to taxes, but this break offers some relief.

More from Smart Tax Planning:
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Skipping a mandatory distribution from your IRA? What you should know
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