Consider using tax-advantaged accounts to help lower your tax bill.
Even in the wake of complex tax provisions, a key to lowering your tax bill is really quite simple: report lower taxable income. Since few of us actually want to earn less, the next option is to deposit as much income as you can into tax-advantaged accounts. If you haven’t contributed the maximum amount to a qualified retirement plan at work, now is the time to update your contribution amounts for 2019.
• For reference, contributions for 401(k) and other retirement plans for the 2018 tax year were $18,500 a year (or $24,500 for those age 50 or older).
• Consider making additional salary deferrals if you are eligible to participate in an employer supplemental employee retirement plan (SERP). This will enable you to further maximize contributions to reduce your taxable income now and defer more compensation into later years when your tax rate may be lower.
• Also consider saving on a pre-tax basis for healthcare. You can accumulate funds on a tax-deferred basis to pay for healthcare expenses through either a Health Savings Account (HSA) or flexible savings account (FSA). Your workplace may offer one, both or neither of these options, so check with your employer.
• If you work for yourself, consider contributing to a solo 401(k) retirement plan, SEP IRA or SIMPLE plan.
• Once you maximize employer retirement plans, consider contributing to an IRA if you meet the income limits. Traditional IRA contributions are tax deductible if your modified adjusted gross income is under $73,000 for individuals or $121,000 for joint filers.
• You have until April 15 to establish a new IRA and make contributions for the prior year.
The Raymond James financial advisors at Towne Investment Group and Towne Wealth Management can talk with you about retirement account contribution strategies. Please contact Arch Brown at 757-962-4981 or any of the other financial advisors with any of your questions.
Arch M. Brown, Jr. is a financial advisor with Raymond James Financial Services, Inc. and a Managing Partner at Towne Wealth Management.
Raymond James financial advisors do not render advice on tax or legal matters. You should discuss any tax or legal matters with the appropriate professional. Securities are offered through Raymond James Financial Services Inc., member FINRA/SIPC, and are: NOT insured by FDIC or any governmental agency, NOT guaranteed by TowneBank, NOT deposits of TowneBank, and are subject to risk and may lose value. Towne Investment Group, Towne Wealth Management and TowneBank are not registered broker/dealers and are independent of Raymond James Financial Services, Inc. Investment advisory services are offered through Raymond James Financial Services Advisors, Inc. Main Office: 5806 Harbour View Boulevard, Suite 202, Suffolk, VA 23435. (757)-638-6850. www.towneinvestmentgroup.com