Off-Season Tax and Investment Strategies for 2019

Since we’re heading into summer, you might think it’s a good time to sit back, relax, and not think about taxes. This is a great time for off-season planning, however! The memory of how well – or how poorly – tax season went is still fresh, and there is plenty of time to act on any suggestions from your CPA or financial advisor so the rest of 2019 is more organized.

Estimated taxes are an important piece of off-season planning. Check out our previous post on who is affected and how to calculate it.

This summer, here are our suggestions to make time, taxes, and investments work in your favor.

SALT Deductions

SALT, or State and Local Taxes, are now limited to a cap of $10,000 per year. Residents in high-tax states like California, Hawaii, Washington, D.C., New Jersey, New York, and others aren’t totally resigned to losing money on high income taxes. Another strategy to consider is transferring a portion of your investment portfolio to state-issued Treasuries and municipal bonds. The value here is that these notes are tax-free (if they’re issued by the state in which you live). Though high-yield bonds will produce a better return, the tax savings may be worth it.

Estate Tax Planning

Though the current federal estate tax exemption doubled through 2025, if you’ve got significant wealth and aren’t likely to use it up in the next six years, now is a good time to draft a plan for wealth transfer. There are a variety of trusts that can preserve wealth outside of the tax system, so you can still earn an income, but your heirs won’t be subject to hefty taxes.

There are two main categories of trusts: revocable and irrevocable. Revocable trusts are kept in your name while you’re alive; they’re flexible but could also be subject to estate taxes. Irrevocable trusts transfer assets out of your name (and estate), are less flexible, and trust assets are generally not subject to estate tax. Trusts have benefits in long-term estate planning, like avoiding probate, increased privacy, and scheduled disbursements.

Charitable Donations

Since the Tax Cuts and Jobs Act of 2017 virtually eliminated or reduced several deductions, most people won’t itemize come tax time. That doesn’t mean that charitable donations can’t still be part of a larger tax strategy, though. Take this summer and decide, based on projected income, if 2019 is a year to bunch charitable donations.

Read our previous post on bunching charitable deductions and establishing a donor-advised fund as ways to maximize the charitable contribution tax deduction.

Investment Fees

The Tax Cuts and Jobs Act also eliminated the deduction for advisor fees, which are taxable. If you have substantial investments and trades, consider paying a commission instead of using a fee-based advisor. Commission aren’t taxed. They are charged as you trade, so work with your CPA and financial advisor to see if this strategy makes sense for you.

Expanded 529 Plans

State-based 529 plans have been a great way to save money for higher education expenses for years. Now, the ways in which you can use 529 funds has broadened to include private school for K-12. 529 funds can still be used for tuition, room and board, and supplies, too. Distributions are tax-free when used for any of these qualified education expenses.

These are just a few suggestions for tax-savvy moves to make this summer. There may be other ways to save on taxes this year, based on your individual situation. Contact Naden/Lean to talk about an off-season tax strategy that works for you.