As we head toward the end of the year, consider maxing out
your contributions on tax-advantaged accounts to help manage your 2019 return.
While some accounts, such as an IRA or Health Savings Account (HSA), allow you
to continue making contributions up until April 15, 2020, most
payroll-deduction plans such as a 401(k) will stop at year end (for 2019
contributions). Employees can contact their plan administrator to learn how
they might make additional contributions above what is automatically deferred
from their paycheck.1
This may also be a good time to strategize your retirement
plan contributions for next year. If you’d like to discuss strategies for any
employer, retirement, college or health savings account contributions, please
let us know.
The 2019 contribution limit for 401(k) plans is $19,000, up $500
from last year. Taxpayers age 50 and older can contribute an additional catch-up
contribution of $6,000.2
If you haven’t maxed out your Individual Retirement Accounts
(IRAs), you may contribute up to $6,000 in 2019. Be aware that’s the total
amount that can be contributed to all the IRAs you own, including Traditional
and Roth. People age 50 and older can add another $1,000 to their IRA accounts
HSA contribution limits for 2019 have increased to $3,500
for individuals and $7,000 for a family, when accompanying a high-deductible
health plan. The catch-up contribution isn’t available until age 55 and older, for
an extra $1,000.4 An HSA can be used as an emergency savings account
for any reason, as long as you follow the rules. You can pay some of your qualifying
health care expenses out of pocket, but be sure to keep the receipts. Should
you need additional funds, you can pull amounts up to the paid receipts from
your HSA without incurring any tax liability.5
If you don’t need the money for immediate expenses, consider
using those reimbursed funds as contributions to your HSA for the next year,
which offers the advantage of being tax deductible once again. Even if your
regular contributions are made by payroll deductions through your employer, you
can make direct contributions from your personal checking account, and then
deduct that additional amount on your personal income tax return.6
Just don’t exceed the annual contribution limit.
Content prepared by Kara Stefan Communications.
1 Sandra Block. Kiplinger. Oct. 31, 2019. “10 Year-End
Moves to Lower Your 2019 Tax Bill.” https://www.kiplinger.com/slideshow/taxes/T055-S003-10-year-end-moves-to-lower-your-2019-tax-bill/index.html. Accessed Oct. 31, 2019.
Kagan. Investopedia. June 19, 2019. “401(k) Contribution Limits for 2019.” https://www.investopedia.com/retirement/401k-contribution-limits/. Accessed Oct. 31, 2019.
Reed. Smart Asset. July 17, 2019. “IRA Contribution Deadlines for 2018 and 2019.”
https://smartasset.com/retirement/ira-contribution-deadline. Accessed Oct. 31, 2019.
4 Kathryn Mayer. Employee Benefit News. 2019. “From HSA
contributions to 401(k) limits, 11 numbers to know for 2019.” https://www.benefitnews.com/list/from-hsa-to-401-k-contribution-limits-11-numbers-to-know-for-2019. Accessed Oct. 31, 2019.
5 HASstore. Louise Norris. “Compound It! How to use your
HAS as an emergency fund.” https://hsastore.com/learn/basics/hsa-emergency-fund. Accessed Nov. 20, 2019.
6 National Benefit Services. “HSA Frequently Asked
Questions.” https://www.nbsbenefits.com/hsa-frequently-asked-questions/. Accessed Oct. 31, 2019.
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