As March begins, most high school wrestling seasons have ended or will be ending soon. This is the time of year to get tax returns done. And just like coaches stress the importance of wrestling year-round to their student-athletes, coaches need to think about preparing their tax return year-round.
However, even if you have not done too much this past year, you can still do a few things before April 15 to reduce your tax bill.
I came up with a few last-minute ways for coaches to reduce their 2018 income taxes.
Don’t think just because you no longer can take business deductions on your Schedule A itemized deductions that no options are available for year 2019 tax planning.
The key is you may need to rebuild your receipts or mileage logs to help with 2018 and now is the time to put together a system to keep track of your 2019 tax receipts.
Prior to 2018, you could write off certain expenses on your Schedule A itemized deductions, but it was subject to a reduction of those expenses based on your income.
So, for 2018, if you are a teacher and you kept all your receipts you can take advantage of your $250 deduction on your form 1040. If you did not, rebuild those expenses. Qualified expenses include professional development courses, books, supplies, computer equipment, other equipment and supplementary materials that you use in the classroom. Visit this link to the IRS Educator Expense Deduction.
And if these expenses are eligible to be reimbursed by your school/employer, take the reimbursement vs. the tax deduction.
Max out your retirement savings
If you have the ability and income to save additional money, put money in a 403 (b) plan. If your school matches your 403 (b) contributions, you will want to contribute to get the matching from your school. After all, the matching is free money! You will pay tax on the “free money” when you take it as a retirement distribution. If you don’t get a match from your school, consider contributing to a Roth IRA if you are eligible. You could even put money into a Backdoor Roth IRA if eligible.
Max out your charitable contributions
It may make sense for you to bunch your charitable contributions into one year. For example, if you are close to $12,000 filing single or $24,000 married filing jointly for your Schedule A itemized deductions, you may want to move certain expenses into one year.
What you could do with your charitable contributions is instead of making contributions in December 2019, you maybe want to make your 2019 and 2020 contributions in 2020. And you maybe want to move your 2021 contributions into 2020.
Let’s say you are single and have $11,000 of itemized deductions and contribute $1,000 to charity. In 2019, you would move that $1,000 into 2020. For 2020, you would make your $1,000 contributions as normal. And for 2021, you would make that charitable contribution in December 2020. This would give you $14,000 in itemized deductions for year 2019 which could be higher than the single standard deduction.
This goes for cleaning out your garage and closets too. Plan the timing of your cleaning to maximize your deductions. Send those gently used wrestling shoes on to your favorite charity!
Learning credits
Who knows what the tax rules will be going forward, but you want to see if you are eligible for any qualifying education expenses. As with the first topic about being reimbursed for purchasing school supplies, generally you are better off getting reimbursed by the school versus taking these credits. Please note the tuition and fees deduction did expire at the end of 2017.
The American Opportunity Credit and The Lifetime Learning Credit are complicated and not easily understood. Be sure to research this credit if you think you may have expenses that qualify. This is another planning opportunity to pay certain expenses in certain years depending on your income limits. It may make sense to prepay for Spring Semester over winter break in December or it may make sense to push those expenses into the following year.
Tax planning for non-teachers
Many wrestling coaches do not teach. You may coach at a school and are paid with Form 1099-Misc instead of a W-2. You may qualify to put your income and expenses on a Schedule C. Items like mileage, business cards, coaches’ clinics, meals purchased for others, advertising, etc. can be stated on Schedule C thus reducing your Form 1099-Misc taxable income. Learn more about Small Business Accounting monthly tasks.
Keep those records
The key is to keep records for 2019. Even if you have to put them in a shoe box, it’s better than not keeping track of them at all. Today, there are plenty of apps to take photos of expense receipts and keep self-organized.
About the author
Susan Bannwart-Mairo is a CPA with over 30 years of accounting, business coaching, software consulting and tax experience. Susan is the owner of Highpoint Advisory Services Inc. based in Schaumburg, IL and helps individuals and businesses throughout the nation with their accounting and tax needs. She is a Past President of the Illinois CPA Society’s O’Hare Chapter and currently a member of the Illinois CPA Society.