12 Days of Tax Planning
- Organize Receipts/Paperwork – The more organized you are now, the better information you’ll have for tax planning.
- Defer Income (end of year bonus, etc.) – Pushing income from this year to next could result in paying less overall tax on that money.
- Bunch/Accelerate Deductions (charitable, Medical, etc.) – Never spend money in January, February, and March that you could have spent in November or December. Pushing medical spending into one year helps with deductibles and gives you a better chance to cross the threshold for tax deductibility. Likewise, giving to a charity early and late in the same year rather than every year increases your ability to itemize deductions.
- Maximize Retirement Plan Contributions (especially if there is an employer match) – If your employer matches any of your retirement plan contributions, ensuring you get the maximum match is an easy way to put more money toward your retirement. If you’re self-employed, deferring income in a retirement account such as an IRA, SEP IRA, SIMPLE, etc can lower current year tax significantly. However, you’ll be hedging your bets that in future years you’ll be in a lower tax bracket.
- Contribute to an HSA – Contributions to an HSA can be a great way to save a little on the costs of health care, but it can also become a supplement to an overall retirement plan strategy.
- Harvest Investment Losses – If you’ve got some loser stocks, use them to offset income. You can use up to $3,000 a year to offset other income.
- Make 529 plan contributions – The contributions made to a 529 plan won’t lower any current tax, but the funds grow tax free. This can mean significant extra money is available when it comes time for the little ones to go to college.
- Convert IRA funds to Roth IRA – When a year presents itself where income is lower than expected, converting IRA funds to a Roth IRA could be a way to allow that money to grow tax free. (This can be very tricky though….don’t attempt this on your own!)
- Get rid of PMI – There is a really good chance the deduction for Private Mortgage Insurance will go away. If you’re close to the 20% equity mark, get there as soon as you can and then get the PMI removed.
- Adjust withholdings/Make Estimated Tax Payments – Look at how much is going toward taxes from your paycheck and make adjustments so you don’t owe anything or get much of a refund at tax time. You can do better things with your money than the government can. Likewise, if you’re self-employed, get your estimates in so there won’t be any surprises at tax time.
- Make Gifts – Gifts up to $14,000 can be given with no tax effect to you or the recipient.
- Have a Kid! – Right now, kids can be worth a minimum of $4,000!
Less Taxing Services, LLC
Taxes – Bookkeeping – Accounting | Naples, FL