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In the last two years we have seen many individual tax changes that may have reduced some deductions, increased others and dramatically changed your tax return. There are still a number of tax planning tools available and in this letter, I will remind you of a few.

Immediate AND long-lasting planning tips:

If your employer offers a 401(k) plan, America’s #1 tax shelter continues to be deferring the maximum amount the IRS allows to your 401(k) this and every year. Because employers are required by law to match a portion of your own deferral, this is a tax deduction with free money!

Fewer Americans are now able to itemize deductions because of the huge benefit received from the increased standard deduction. That doesn’t mean that you still can’t do anything though. One simple tool to get the best “bang for your buck” would be to practice what I call bunching of charitable contributions. This trick guides you to make charitable contributions every other year so that you double up and get a deduction in some years without giving it up in others. Simply make your 2020 contributions as early as possible in 2020, and then make your 2021 contributions at the very end of 2020 so that you “bunch” all your amounts in one year to potentially get the best itemized deduction amount.

One thing to keep in mind since you live in Montana: If you itemized in earlier years you will continue to itemize your deductions since Montana’s standard deduction is very low.

Because there is no longer any deduction for work related expenses you must carefully read your employer’s handbook to see if they offer a reimbursement program for job-related expenses like licenses, dues, uniforms, supplies, etc.

One of my annual overall planning tools is to advise clients to be “debt free at 65.” This life-long goal is a basic element of financial and tax planning that is constantly overlooked in today’s era of 30-year mortgages and cheap re-financing options. With the greatly reduced itemized deduction availability of home mortgages it is more powerful than ever!

This year the IRS and Congress have become very concerned about cryptocurrencies (such as Bitcoin) and you must be certain to report any of these transactions - there is even a new question on every tax return asking about it. 

A major change has occurred in 2018 on home equity lines and 2nd mortgages, most of which are not deductible any longer. In order to get your largest deduction, I will need to know much more information on these amounts than in the past such as amounts borrowed and how they were used.

Home-related energy efficiency credits are now mainly expired on the Federal level but Montana still offers this credit up to $500 per taxpayer per home or rental.