The end of the year is fast approaching, signaling the onset of another tax season. When preoccupied with holidays or gift shopping, you might be tempted to set aside tax planning. However, it’s advantageous to prepare in advance, especially if your aim is to lessen your tax bill and boost your refund. Consider checking your tax status early, rather than delaying until tax season approaches. Here are seven helpful pointers to optimize your tax returns this year.
1. GIVE GENEROUSLY
Holiday seasons often inspire acts of charity, which can reap surprising tax benefits. Now is an opportune time to declutter your home and give away the items you no longer needed. If the items are gently used, they might qualify for tax deductions. If you prefer to donate cash, keep the receipt as evidence. Take note, though, that donations have to be made by December 31 to count for next year’s tax season.
2. REVIEW YOUR INVESTMENTS
While tax savings shouldn’t be your main justification for investing, sometimes unfortunate investment outcomes can be advantageous on your tax return. Even though nobody wants investment losses, they can offset gains up to $3,000, reducing your tax liabilities.
3. CONSIDER YOUR RETIREMENT PLAN
Contributing to your employer’s retirement scheme or your 401(k) can be financially prudent. Not only will these contributions augment your retirement savings, but they can also diminish your taxable income.
4. DEFER YOUR INCOME
Earning enough to push you into the next tax bracket can have substantial tax implications. Hence, it might be wise to defer some income until the following year. For instance, if you plan to sell assets or stocks, you may consider postponing this until after New Year.
5. INVEST IN EDUCATION
Funding an education savings account can bring potential tax savings. Different plans allow up to $2,000 contributions per child, offering a partial tax deduction or credit.
6. GIFT GENEROUSLY
Providing monetary gifts can bring tax benefits. The law permits tax-free gifts up to $14,000 per recipient, or up to $28,000 if you’re married, without necessitating a gift-tax return.
7. GET PROFESSIONAL ADVICE
Tax planning can be challenging and confusing. Engaging professional tax advisors can help decipher your tax situation, ensure you are making the most beneficial decisions, and discover tax-saving opportunities tailored to your needs.
While the obligation to pay taxes is generally unwelcome, it’s a critical part of living in a civil society. Despite this, it’s hard to see a significant chunk of your paycheck vanish. Even though you’ll always owe some taxes, strategic planning may reduce the amount owed and maximize your deductions.
Thoroughly examining your financial situation is key to determine which moves are most beneficial for you. If ever you find yourself puzzled with tax planning, don’t hesitate to seek professional advice.
What are the tax tips that you’ve found most beneficial? Do you have any advice for navigating taxes independently?
