Tax Planning Checklists for Tax Years 2019 and 2020

John J. FureyNovember 20, 2019


A client asked for checklists for year-end tax planning for Tax Year (TY) 2019 and tax planning for Tax Year 2020. Here are some things to think about to do tax planning.

Check Tax Withholdings and Quarterly Estimated Payments for TY2019

  • You are required to pay to the IRS the lesser of:
    • 1) 110% of TY2018 total taxes (100% if your Adjusted Gross Income (AGI) in TY2018 was 150K or lower); or
    • 2) 90% of TY2019’s estimated total taxes.
    • This number is referred to as the IRS Safe Harbor amount.
  • If your withholdings and quarterly payments do not equal or exceed the Safe Harbor amount, the IRS will assess interest and penalties.
  • For TY2018 the IRS waived the interest and penalties because of the significant changes from the new tax law (2017 Tax Act) that was first effective in TY2018.
  • The IRS is not expected to be so forgiving for TY2019.
  • You should check your taxes withheld from wages, pensions, annuities, Social Security and IRAs, plus any quarterly estimated tax payments to ensure that you meet the Safe Harbor amount.
  • At a client’s request, HFA prepares tax projections throughout the year. One of the reasons to do tax projections is to determine if estimated withholdings and quarterly payments will meet the Safe Harbor amount.

Determine if you will use the Standard Deduction or Itemize Deductions

  • The higher Standard Deductions due to the 2017 Tax Act are:
TY2019 TY2020
Single $12,200 $12,400
Single (65+) $13,850 $14,050
Married $24,400 $24,800
Married (both 65+) $27,000 $27,400
Head of Household $18,350 $18,650
Head of Household (65+) $20,000 $20,300


  • For most taxpayers Itemized Deductions are now limited to:
    1. Out-of-Pocket Medical expenses in excess of 10% of AGI;
    2. State and Local Income and other Taxes (SALT) limited to $10,000;
    3. Mortgage Interest expenses; and
    4. Charity
  • As a result of the 2017 Tax Act the percentage of taxpayers who itemized deductions in TY2018 was about 10% compared to about 30% who itemized in TY2017.
  • If you do not plan to itemize deductions, you do not need to compile the necessary information and documents.
  • If you do plan to itemize, you may want to try to bunch as many medical and charitable deductions as possible into the year you plan to itemize to maximize your tax savings. In other years you can take the Standard Deduction.

Remember to manage your AGI

  • There are many tax and other items that are based on your AGI, such as:
    1. Deduction for medical expenses
    2. Eligibility for full Child Tax Credit (under 200K-S/400K-M)
    3. Taxation of Social Security benefits (starts at 25K-S/32K-M)
    4. Imposition of the 3.8% Net Investment Income Tax (200K-S/250K-M)
    5. Ability to make IRA or Roth IRA contributions
    6. Eligibility for Education tax credits
    7. Ability to deduct full Student Loan Interest (under 70K-S/140K-M)
    8. Additional Medicare premiums (increases start at 85K-S/170K-M)
  • Here are some ways to reduce your AGI:
    1. Make before-tax contributions (401k, flexible spending account, etc.)
    2. Defer compensation or income to next year if your tax rates will be lower next year
    3. Convert taxable interest to tax-exempt interest
    4. Do tax-loss harvesting to reduce capital gains income
    5. Do a Qualified Charitable Distribution (QCD) to reduce the taxable income from a Required Minimum Distribution (RMD)
    6. Contribute to a Health Savings Account (HSA), if eligible
    7. Contribute to an IRA, SIMPLE or a SEP-IRA, if eligible
    8. Deduct student loan interest
    9. Take a distribution from a Roth IRA instead of a Traditional IRA

Make Charitable contributions in the most tax-effective way

  • If you are over 70 ½ and must take an RMD from your IRA, consider making QCDs to charities directly from your IRA. For example, if your RMD is 40K and you contribute 25K to charities using QCDs, only 15K is included in your AGI. Here is a link to more information about QCDs
  • Consider bunching charitable contributions in TY2019 by making contributions of highly appreciated securities to a Donor Advised Fund (DAF) that will fund your charitable giving for the next several years. Here is a link that explains how the Schwab DAF works.
  • For example, if you are married (under 65) and your itemized deductions in TY2019 come to 22K you could donate securities with a market value of 15K to a DAF. You itemized deductions would now come to 37K and would exceed your Standard Deduction of 24.4K. If you are in the 32% marginal tax bracket, you would save about 4K in income taxes by this donation. In addition, if you bought the securities at 3K, you would avoid paying about 2.3K in capital gains taxes. In future years you could use the Standard Deduction. Total tax savings would be about 6.3K.
  • If you do not want to donate to a DAF, you can make donations of highly appreciated securities directly to charitable organizations.

Know amounts and deadlines for IRAs and RMDs

  • Contributions to a traditional IRA or a Roth IRA are due by the deadline for the filing of your tax return. For TY2019, you must make your IRA contribution by 4/15/20.Contribution limits are 6K plus 1K (catch up over age 50) for TY2019 and TY2020.
  • If you turn 70 ½ in TY2019, you must take your first RMD by 4/15/20. You will also have to take your second RMD by 12/31/20. You can elect to take your first RMD in TY2019. Thereafter, your RMD must be taken each year no later than December 31. The penalty for failing to take an RMD is 50% of the RMD amount. You do not want to miss this deadline.

Consider Gifts to Children, Grandchildren and Others

  • The annual gift tax exclusion is 15K for TY2019 and TY2020.
  • If you gift highly appreciated securities to a person in the zero percent capital gains tax bracket, the person will owe no taxes if the securities are sold.
  • If the person is under 19 or an unmarried student (age 19-23), the Kiddie Tax (higher tax rates) will apply to any unearned income above 1.1K.
  • If a child has wages of 6K or more, you can make the maximum contribution to a Roth IRA on their behalf to help start a retirement fund.
  • If you want to get a deduction on your PA tax return for a contribution to any 529 Plan the maximum amount is 15K per child per taxpayer and the deadline is 12/31/19.

If you have any questions about tax projections, DAFs, IRAs, QCDs, RMDs or other tax issues please do not hesitate to call our office (610-651-277).

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