Looking for ways to reduce your taxable income? Scan through these ideas and contact me if you would like to discuss in more detail and apply to your situation.

Health savings account

  • Qualify if in a high-deductible medical plan (HDHP)
  • Max contribution for 2019 = $7,100 for family ($3,550 individual)
  • Contribute up to April 15

Qualified Business Deduction

  • 20% of net business income
  • Limitations based on income level, w-2 wages paid to employees, etc.

Asset purchases to write off (placed in service 2019)

  • Sec. 179 property – 100% deduction up to certain limits ($1m)
  • Bonus depreciation – 100% deduction (valid until end of 2022)

Self-employed medical expense

  • Must be ineligible to participate in an employer sponsored plan
  • Earned income limits (can only deduct up to business income)

Retirement contributions (note: there are limitations based on income & filing status)

  • Traditional IRA (reduces taxable income in year of contribution)
    • Max $6,000 contribution for 2019 (increases each year)
    • Earnings are not taxed
    • Taxable when withdrawn during retirement
    • Contribute up to April 15
  • Roth IRA (does NOT reduce taxable income in year of contribution)
    • Same annual contribution limit as a traditional IRA
    • Earnings are not taxed
    • Not taxed when $$ is withdrawn during retirement
    • Contribute up to April 15
  • SEP-IRA (reduces taxable income in year of contribution)
    • Max contribution = 25% of adjusted net earnings (approx. 20% once factor in certain other factors) from self-employment or $56,000 (whichever is lower)
    • Assume business income at 2018 level ($26,847) plus $5000 = ~$32k. Then the max contribution is $8,000 (higher than traditional/Roth limit of $6,000)
    • Contribute up to April 15
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