Retirement Accounts
Tax-deferred retirement and health-care savings contributions are subject to annual limits and are also a use-it-or-lose-it proposition. “Those who have large traditional IRAs should evaluate whether a conversion to a Roth IRA may be beneficial,” Shier says. “If asset values are lower due to market conditions, there’s an expectation that [one’s] tax rates will increase in the future and retirement assets may not be needed for lifetime spending.”
Ann Etter, a CPA/CFP with Goodney & Associates in Northfield, Minn., likes Roth conversions right now. “While it increases taxes for 2019, it decreases potential future tax burdens,” she says, adding that tax rates will likely increase after the TCJA sunsets in 2025, if not before. One common mistake people make is funding every retirement account without regard to contribution limits. “For instance, if you change jobs midyear and you maxed out your 401(k) at job one, you can’t contribute anything to your 401(k) at job two,” Etter says.
Investing
Volatile markets can create panics and buying opportunities—and potential tax savings. First, rather than sell in a low-market panic, calmly compare a portfolio’s early-2019 value with its current worth. Ultimately, it might not be prudent to liquidate everything at once. “This might cause some big capital gains,” says Michael M. Eisenberg, a CPA and personal financial specialist and principal at Squar Milner Financial Services in Encino, Calif.
“Given the 2019 volatility in the markets, high-net-worth individuals may be able to identify holdings in their after-tax portfolio that can be sold to recognize capital losses,” says Schultz from Plante Moran. “These losses can offset 2019 capital gains, with an additional $3,000 of losses able to offset other sources of income.”
Morris at Morris + D’Angelo CPAs advises people to look at qualified opportunity zones—geographic areas carved out as getting special tax treatment by the Tax Cuts and Jobs Act where the government hopes to spur economic development and job creation. “The five-year deferral and reduced rate when actually paying the tax make [it] a decent deal,” he says.