2019 Year-End Tax Checklist

Advanced Planning Team, First Republic Investment Management
November 6, 2019

With year-end quickly approaching, now is an appropriate time to work with your team of advisors to put the finishing touches on your financial and tax planning for the 2019 tax year. The second tax year under The Tax Cuts and Jobs Act (TCJA) of 2017 has brought to light additional considerations that were either unclear or overlooked in 2018. Outlined below are some year-end planning strategies for individuals, Schedule C taxpayers and business owners to consider.

Retirement

  • Consider maximizing your 401(k), 403(b) or other company plan contributions. If you are 50 years and older, catch-up contributions are allowed.
  • Maximize your IRA contributions.
  • Consider converting Traditional IRAs to Roth IRAs, especially if you are either 1) in a low tax bracket and can pay the taxes now with other funds available or 2) have a large net operating loss that can offset the income that is triggered on a Roth conversion.
  • If you are 70 ½ or older this year, make sure you review when you must take your required minimum distribution.
  • If you are self-employed, consider opening and funding a SEP IRA or solo 401(k).
  • Check beneficiary designations (both primary and contingent) on all retirement plans

Gifting

  • Consider using your annual gift tax exclusion amount ($15,000 per person) for cash gifts.
  • Consider using your annual gift tax exclusions to fund 529 plans.
  • Consider using all or a portion of your lifetime federal estate, gift and GST exemption amounts ($11,400,000 in 2019) by creating and funding an irrevocable trust.
  • Before gifting any asset, know the cost basis and tax consequences to the donee.
  • Revisit your gifting strategies and your estate planning documents.

Income Taxes

  • Consider “bunching” your deductions.
  • Work with your tax advisor to prepare an income tax projection for 2019 and 2020.
  • Work with your tax advisor to either accelerate paying expenses in the current year or deferring payment to the following year.
  • Work with your tax advisor to either accelerate income in the current year or defer income to the following year.
  • Work with your tax advisor to determine whether you will be subject to AMT this year and, if so, evaluate ways to minimize exposure.
  • Check your tax withholdings to avoid interest and penalties.
  • Consider ways to minimize the 3.8% Net investment Income Tax (NIIT) by reducing modified adjusted gross income (MAGI) and Net Investment Income (NII).

Insurance

  • Review your current insurance policies.
  • If you experienced a recent major life event (birth, death, marriage, divorce, etc.), revisit the amount and type of coverage.
  • Check the beneficiary designation forms for all insurance policies.
  • Request an in-force ledger for all permanent life insurance policies to determine whether those policies are still performing as expected.
  • If you are making gifts of premiums to an ILIT, make sure the trustee is providing annual Crummey letters to the beneficiaries.

Investments

  • Review your asset allocation to determine if rebalancing is necessary.
  • Confirm whether your investments are aligned with your risk tolerance and investment objectives.
  • Consider harvesting capital losses to offset realized capital gains. In addition, you can deduct up to $3,000 of capital losses against ordinary income and carry forward excess capital losses to future years until exhausted.
  • If you are planning to purchase a mutual fund in a taxable account before year-end, check whether the fund is expected to make a sizable capital gains distribution. If so, consider deferring the purchase until after the record date of the distribution.

Gifting to Charity

  • Consider using low-basis stock or other highly-appreciated assets (held for more than 1 year) to fund your charitable gifts.
  • Evaluate whether a charitable vehicle (i.e. donor advised fund, private foundation, charitable trust, etc.) would be appropriate.
  • If you are 70 ½ or older this year, consider making a 2019 charitable donation directly from your Traditional IRA via a qualified charitable distribution (QCD). (Note: QCDs cannot be made to a donor advised fund or private foundation.)

For additional insights, please refer to our 2019 Year-End Planning Considerations whitepaper or reach out to your local First Republic wealth professional.

The strategies mentioned in this article may have tax and legal consequences; therefore, you should consult your own attorneys and/or tax advisors to understand the tax and legal consequences of any strategies mentioned in this document. First Republic does not provide tax or legal advice. Information is provided to you as is, does not constitute legal or tax advice and we are not acting as your attorney or tax advisor. This information is governed by our Terms and Conditions of Use.