Insight

Planning for the 2019 Year-End and Upcoming Changes in Tax Law

Planning for the 2019 Year-End and Upcoming Changes in Tax Law

Christopher Nuss

Christopher Nuss

November 21, 2019 05:14 PM

The end of the 2019 taxable year is quickly approaching, which means there are only a few weeks left for certain tax planning. This article discusses potential tax planning strategies for 2019, recaps some of the more significant changes that occurred in 2019, and also addresses upcoming changes you should be aware of for the 2020 taxable year.

Certain Tax Planning for the 2019 Year-End:

Prepay Deductible Expenses: If you plan to itemize or are close to exceeding the standard deduction for individual taxpayers, you may want to consider the timing of your expenses and prepaying deductible expenses to maximize deductions and reduce taxable income for the 2019 taxable year. For cash method business taxpayers, now could be a good time to acquire property to depreciate or stock up on items you know you will need next year.

Harvest Losses: If you are subject to capital gains tax or will receive capital gains distributions at year end, consider selling certain investments with unrealized losses to offset gains. Remember there are specific rules about how gains and losses must be netted for tax purposes and repurchases of similar securities, so be sure to talk to your financial or tax advisor before selling investments for these purposes.

Bunch Charitable Contributions: After the increase in the standard deduction, to take advantage of charitable contributions by itemizing, you may want to consider bunching your charitable contributions previously made over two or three taxable years all into one taxable year. If you are considering bunching your charitable contributions, you may also want to consider setting up a donor-advised fund.

Alternatively, qualifying donors age 70 ½ and older may want to consider making IRA charitable rollovers of up to $100,000 annually to public charities as qualified charitable distributions are excluded from gross income and may also qualify for the Endow Iowa Tax Credit.

Contribute to College Savings Iowa - 529 Plans: Consider contributing to a 529 college savings plan to take advantage of the Iowa income tax deduction. Note that Iowa taxpayers can make contributions after December 31 but on or before the deadline for filing an Iowa individual income tax return, excluding extensions, and elect to have those contributions made in 2020 deducted on the taxpayer’s 2019 Iowa individual income return.

Contribute to Retirement Savings Plans: Consider making any additional pretax contributions left within your contribution limit to retirement savings to reduce your taxable income. This also applies to retirement plans for self-employment income. Note that certain types of retirement contributions can be made into 2020 for the 2019 taxable year.

Take Advantage of Energy Credits: The residential energy efficient property credit is available for qualified purchases through 2021, although the credit is in effect at reduced rates. The business energy investment credit is also available for qualified solar and other types of property. Note that the credit rate may be reduced.

Invest in Qualified Opportunity Zones (“QOZs”): For taxpayers with eligible capital gains, Qualified Opportunity Zones provide an investment vehicle with tax incentives for taxpayers to invest in communities designated as economically distressed QOZs. See our previous articles discussing the tax benefits and general rules for QOZs as well as our update on the IRS' most recently issued guidance. Since our last update, the IRS has also issued a draft of the revised Form 8996 used for reporting Qualified Opportunity Fund data. Although Final Regulations are still forthcoming, the clock is ticking to maximize tax incentives.

Complete Like-Kind Exchanges: Eligible like-kind exchanges of personal property must be completed during the 2019 taxable year to take advantage of the tax-deferred treatment for Iowa tax purposes. Note that like-kind exchanges of personal property were already repealed for federal tax purposes and will no longer be allowed for Iowa tax purposes after 2019.

Tax Cuts and Jobs Act (“TCJA”): As a general reminder, the TCJA resulted in many changes for taxpayers. Some of the most notable changes include: an increase in the standard deduction, modification of itemized deductions, a deduction for qualified business income under Section 199A, a limit on the business interest deduction under Section 163(j), and “global intangible low-taxed income” for owners of controlled foreign corporations. Be sure to consider or discuss with your tax advisor how all of the recent tax law changes could impact your tax return for the 2019 taxable year (and beyond).

Qualified Business Income (“QBI”) Deduction – Rental Income: Previously, it was unclear whether interests in rental real estate were a “trade or business” eligible for the QBI deduction under Section 199A. The IRS recently issued Revenue Procedure 2019-38 providing certain safe harbor requirements that, if satisfied, allow certain interests in rental real estate to be treated as a “trade or business” for purposes of the QBI deduction. If the safe harbor requirements are not met, it still may be possible to qualify for the QBI deduction if certain other definitions of a “trade or business” are met. We can assist taxpayers with interests in rental real estate review the safe harbor requirements to determine qualification and what documentation is necessary to maximize the benefit from this deduction.

Recap of Recent Tax Law Changes:

Sales Tax Reform - Wayfair: The U.S. Supreme Court issued its landmark decision in South Dakota v. Wayfair, Inc., on June 21, 2018. Since the decision, many states, including Iowa, have or are in the process of implementing online sales tax laws similar to South Dakota. Now that it has been over a year since the Wayfair decision, it is only a matter of time before states start enforcing their new tax laws. Iowa’s “marketplace facilitator” and out-of-state retailer collection requirements became effective for qualifying sales on January 1, 2019. For more information about sales tax reform, see our previous article.

The Affordable Care Act: The individual mandate was effectively repealed as of January 1, 2019. Previously, the IRS extended certain due dates for filing ACA-related information returns. It is currently unclear if or how reporting requirements for the 2019 taxable year could differ from prior years, so be sure to keep an eye out to maintain ACA compliance.

Upcoming Tax Law Changes for 2020:

Form 1099-NEC: Beginning with the 2020 taxable year that is reported in 2021, the IRS is bringing back a separate Form 1099-NEC to report nonemployee compensation, which is currently reported on Form 1099-MISC. The IRS has released a second draft of Form 1099. This new form is expected to resolve confusion caused by different filing deadlines depending on which boxes are being reported on the current Form 1099-MISC.

Conformity with the Internal Revenue Code: Iowa is slowly conforming to changes in tax law resulting from the TCJA. For tax years beginning during the 2019 calendar year, Iowa adopts the Internal Revenue Code of 1986 as amended and in effect on March 24, 2018, unless otherwise provided. For tax years beginning on or after January 1, 2020, Iowa is switching to rolling conformity such that it will adopt the Internal Revenue Code of 1986, as amended. The biggest change for Iowa businesses is that the Federal TCJA limits for Section 179 deprecation will be fully phased in for tax years beginning in 2020, although Iowa will still not conform for bonus depreciation.

Withholding: The IRS and the Iowa Department of Revenue both provide withholding estimators/calculators to make sure you are withholding the right amount of tax from your paycheck next year. I recommend using these resources and updating your Form W-4 as necessary. Be sure to take into account non-wage income and self-employment income.

Health Reimbursement Arrangements (“HRAs”): Two new types of HRAs have been created, “Individual Coverage HRAs” (“ICHRAs”) and “Excepted Benefit HRAs” (“EBHRAs”). Employers can begin offering these on January 1, 2020.

This article was written for general informational purposes and summarizes the tax laws. As such, it should not be relied upon for compliance with the Internal Revenue Code or Iowa tax law.

CONTACT INFORMATION

For more information about year-end tax planning or upcoming tax law changes and what they mean for you or your business, please contact your BrownWinick attorney, any BrownWinick attorney in the tax practice group, or one of our tax attorneys listed below.

Related Articles

Paying the Price in P.R.


by Best Lawyers

Isis Carballo-Irigoyen discusses discuss intergovernmental relations, opportunity zones, and why a move to Puerto Rico to ease your tax burden likely won’t be as simple as you might think.

An Interview With McConnell Valdés

Baraona Fischer & Cia on the Changes Coming to Tax Law in Chile


by Best Lawyers

Juan Manuel Baraona of the 2019 "Law Firm of the Year" award-winner for Tax Law in Chile discusses forthcoming regulations, career highlights, and his secrets to success in an interview with Best Lawyers CEO Phillip Greer.

Baraona Fischer & Cia LFOTY

Lecher Pays


by Ann E. Evanko and Katherine L. Wood

Can social change be sped up via legislation? A key provision of the recent tax-law overhaul, clearly written with #MeToo in mind, suggests it can.

Social Change Amid #MeToo

Opening Pandora's Box in Portuguese Tax Law


by Best Lawyers

Diogo Ortigão Ramos discusses Cuatrecasas' 2019 "Law Firm of the Year" award for tax law in Portugal.

Cuatrecasas Law Firm of the Year Interview

Monica Biringer and Firoz Ahmed on Canada's Changing Tax Practice


by Best Lawyers

The attorneys from Canada's 2019 "Law Firm of the Year" winning Osler, Hoskin & Harcourt look at their achievements over the past year.

Osler, Hoskin & Harcourt Interview

What Spain’s Proposed ‘Google Tax’ Means for its New Economy


by Mariano Roca López

How the Spanish Stability Program is tapping new sources of tax revenue.

Will Spain Pass the 'Google Tax?'

A Master in Defending the Accused


by Best Lawyers

The relentless pursuit of justice when everything is on the line.

Patrick A. Mullin

Tax Saving Opportunities under Puerto Rico Incentives


by Alexis R. González-Pagani

Puerto Rico offers a variety of attractive incentives packages that cover multiple industry sectors.

Tax Saving Opportunities

Q&A with Konstantin Mikhel at Vlasova Mikhel & Partners


by Best Lawyers

A Q&A with Konstantin Mikhel of Vlasova Mikhel & Partners about his experiences and the legal field in Belarus.

Konstantin Mikhel

Recent Case Law on Cross-Border Reorganizations


by Marie-Hélène Raffin

The Euro Park decision is bound to facilitate the application of the French favorable tax regime to cross border mergers and spin-offs.

Cross-Border Reorganizations

Trending Articles

Discover The Best Lawyers in Spain 2025 Edition


by Jennifer Verta

Highlighting Spain’s leading legal professionals and rising talents.

Flags of Spain, representing Best Lawyers country

Unveiling the 2025 Best Lawyers Editions in Brazil, Mexico, Portugal and South Africa


by Jennifer Verta

Best Lawyers celebrates the finest in law, reaffirming its commitment to the global legal community.

Flags of Brazil, Mexico, Portugal and South Africa, representing Best Lawyers countries

Presenting the 2025 Best Lawyers Editions in Chile, Colombia, Peru and Puerto Rico


by Jennifer Verta

Celebrating top legal professionals in South America and the Caribbean.

Flags of Puerto Rico, Chile, Colombia, and Peru, representing countries featured in the Best Lawyers

How to Increase Your Online Visibility With a Legal Directory Profile


by Jennifer Verta

Maximize your firm’s reach with a legal directory profile.

Image of a legal directory profile

Prop 36 California 2024: California’s Path to Stricter Sentencing and Criminal Justice Reform


by Jennifer Verta

Explore how Prop 36 could shape California's sentencing laws and justice reform.

Illustrated Hands Breaking Chains Against a Bright Red Background

Paramount Hit With NY Class Action Lawsuit Over Mass Layoffs


by Gregory Sirico

Paramount Global faces a class action lawsuit for allegedly violating New York's WARN Act after laying off 300+ employees without proper notice in September.

Animated man in suit being erased with Paramount logo in background

Tampa Appeals Court ‘Sends Clear Message,” Ensuring School Tax Referendum Stays on Ballot


by Gregory Sirico

Hillsborough County's tax referendum is back on the 2024 ballot, promising $177 million for schools and empowering residents to decide the future of education.

Graduation cap in air surrounded by pencils and money

The Future of Family Law: 3 Top Trends Driving the Field


by Gregory Sirico

How technology, mental health awareness and alternative dispute resolution are transforming family law to better support evolving family dynamics.

Animated child looking at staircase to beach scene

The Human Cost


by Justin Smulison

2 new EU laws aim to reshape global business by enforcing ethical supply chains, focusing on human rights and sustainability

Worker wearing hat stands in field carrying equipment

The Litigation Finance Mass Tort Gold Rush


by Justin Smulison

Third-party litigation funding is transforming mass torts, propelling the high-risk area into a multi-billion-dollar industry

Gold coins with data chart backdrop

The 2025 Legal Outlook Survey Results Are In


by Jennifer Verta

Discover what Best Lawyers honorees see ahead for the legal industry.

Person standing at a crossroads with multiple intersecting paths and a signpost.

ERISA Reaches Its Turning Point


by Bryan Driscoll

ERISA litigation and the laws surrounding are rapidly changing, with companies fundamentally rewriting their business practices.

Beach chair and hat in front of large magnify glass

Best Lawyers Expands With New Artificial Intelligence Practice Area


by Best Lawyers

Best Lawyers introduces Artificial Intelligence Law to recognize attorneys leading the way in AI-related legal issues and innovation.

AI network expanding in front of bookshelf

New Mass. Child Custody Bills Could Transform US Family Law


by Gregory Sirico

How new shared-parenting child custody bills may reshape family law in the state and set a national precedent.

Two children in a field holding hands with parents

How US Immigration Works: Everything You Need to Know


by Jennifer Verta

Explore the pathways, processes and evolving policies shaping U.S. immigration today.

Illustration of Immigrant Family Journey in Front of American Flag

Safe Drinking Water Is the Law, First Nations Tell Canada in $1.1B Class Action


by Gregory Sirico

Canada's argument that it has "no legal obligation" to provide First Nations with clean drinking water has sparked a major human rights debate.

Individual drinking water in front of window