Year-end tax strategies that could save you money


Key Points

  • It’s not too late to save on your 2019 income taxes.
  • Certain account contributions and tax deductions could lower your tax bill.
  • Your Ameriprise financial advisor and your tax professional can work together to help you take full advantage of the opportunities available to you.

Here are several ideas that could help reduce your 2019 federal income tax burden. It’s a good idea to consult your Ameriprise financial advisor and tax professional for personalized advice.

Maximize qualified retirement plan contributions

Consider putting as much money as you can into your 401(k), 403(b) or other qualified retirement plan account. Doing so will reduce your taxable income on a dollar-for-dollar basis and will increase your retirement savings. At a minimum, contribute at least the amount your employer will match.

The contribution deadline for 401(k) and 403(b) accounts is Dec. 31, 2019. The contribution limit is $19,000. If you are age 50 or over, you can contribute an additional $6,000.

Deduct medical expenses

If you itemize your tax deductions, you may be able to deduct eligible medical expenses that exceed 10% of your adjusted gross income. There is a wide range of deductible medical expenses — visit the IRS website for details. 

Use stock losses to offset capital gains

While no one likes investment losses, you may be able use them to generate a positive result: a lower tax bill for a given calendar year.

The U.S. tax code requires that losses first offset gains of the same type. For example, short-term losses will first offset short-term gains.

Because of the higher tax rate for short-term gains, focusing on short-term losses can have a more substantial effect on your tax savings than long-term losses — especially if you are in a higher federal tax bracket.

If you didn’t have capital gains this year, you can use up to $3,000 in capital losses to reduce ordinary income. You can carry over any remaining net capital loss to future tax years until you use the loss.

Consider charitable giving  

As a strategy to increase itemized deductions above the standard deduction and receive a deduction from charitable giving, consider transferring a larger amount into a donor-advised fund to gift over future years. Donations are generally disbursed through the fund per your recommendations, and your contribution to the fund is generally fully deductible the year it’s made.

Another way to implement this tax planning strategy is by bunching smaller annual charitable donations into a larger donation every other year or every few years so you can itemize tax deductions.

We can help with year-end planning

Taxes can influence your financial planning decisions. Your Ameriprise advisor can collaborate with your tax professional to factor in your tax situation. If you are looking for a tax or legal professional, your advisor may be able to refer you to one.