End of Year Tax Tips – Part 3

By November 19, 2018Taxes

Low income year

If your 2018 income is lower than usual (temporary unemployment, recent retirement, etc.), consider claiming extra income while you’re in a lower tax bracket. Please contact Griffin Black if you’d like to discuss the following strategies:

Qualified Business Income

The new tax law introduced a 20% deduction on Qualified Business Income (QBI). In essence, 20% of your self-employment income or small business income is tax-free. The deduction will start to phase out if your taxable income goes over $157,500 (single) or $315,000 (married filing jointly). The phase out is much more significant for QBI from services in consulting, law, health, performing arts, financial services, and others. If your income is over the phase-out threshold, consider the itemized deduction strategies mentioned previously. Your tax professional can help you determine what your QBI deduction might be and how you can increase it.

Medicare

  • Your 2018 income will be used to determine your Medicare premiums for 2020-2021. If your modified adjusted gross income exceeds $85,000 (single) or $170,000 (married filing jointly), you may have to pay higher premiums. Consider limiting your IRA withdrawals or delaying capital gains to reduce your gross income.
  • If your 2018 income is significantly lower than 2017 due to a life changing event like retirement, marriage, divorce, death of a spouse, or loss of income property, you may ask the Social Security Administration to use you 2018 income to determine 2019 Medicare premiums. Applying for the adjustment now could prevent an increase in premiums in January.

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