Tax Knowledge_2

I’ve been following this youtuber’s videos, she just put out a complete clip talking about what’s needed to do for tax before 2019 ends. Here are the major points:

Harness loss
charity donating stocks calculated on increased value
401K make sure put in enough to obtain maximum matching from the employer
IRA in the April next year, backdoor IRA
529 plan for children’s education, in New York, it allows $10000, so the base of taxing can be reduced by $10000 in State tax
FSA and HSA 401K exempt from federal tax, but still subject to social security tax, however FSA doesn’t need to pay both. But it has the issue of managing, use it or lose it, or it will be forfeited in next year,
Bunching strategy, means to be over standard deduction amount,

with respect to harness loss, if you have investment loss, make sure harness the loss before the year ends. The calculation is like that, if you have a $10K gain, a $15K loss, then the pure outcome is loss of $5000, the IRS allows you to deduct the income by $3000 in one year, but the rest/$2000 can roll over to the next year. It’s an effective way to lower the total income, hence the AGI(adjusted gross income) would be lower. It’s good to know why IRS come up with MAGI concept, ” Most notably, the IRS uses the MAGI figure to determine how much of an individual’s IRA contribution is deductible and whether an individual is eligible for premium tax credits. The higher the MAGI, the fewer deductions you can take on IRA contributions.If the MAGI is too high, IRA deductions can even reach zero. If this happens, you can still contribute to an IRA plan, but cannot deduct any of the contributions on the following year’s taxes.”

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