4 Easy Ways to Evaluate Your Financial Health
Many people are splurging this holiday season, but amid
buying gifts and big purchases, have you thought about ways to reduce next
year’s tax bill? With the 2020 tax season just around the corner, now is the
time for any last-minute tax preparations.
- Contribute More to Retirement Accounts
Do you have a retirement savings account? If so, contribute as much as you can until the end of the year. The current yearly limits are $19,000 for 401(k)s and $6,000 for IRAs. By contributing the maximum amount, you’ll reduce your taxable income significantly because the contributions are pre-tax and won’t count towards that year’s income.
2. Buy a House
If you’re in the process of purchasing a home, consider closing before the end of the year. Many home expenses are deductible such as mortgage interest up to $750k, property taxes, and interest on home equity loans or lines of credit. You’ll need to save any invoices, statements, and receipts to itemize everything.
3. Contribute to Charity
You probably know that charitable contributions are tax-deductible, but do you know that checks aren’t the only way to give? You can also donate toys, clothes, food, or any other household needs. Don’t forget to keep the receipts to itemize each deduction. Though it does come with a tax break, donate because you want to, not to avoid or reduce taxes.
4. Harvest Your Losses
Did you receive capital gains this year? Try offsetting the tax liability by selling the losing investments. This will reduce the capital gains tax. Only sell taxable investments, not the investments in your 401(k) or IRA. You can’t fool the IRS—if you buy the stock back within 30 days, they can take back your deduction. Don’t let lowering your tax bill get in the way of smart investing.
5. Use a Professional for Tax Planning
Are you curious about tax planning? Should you work with a professional
to prepare your taxes? Well, it depends on your circumstances. If you have a
complex situation or just don’t understand the tax deductions, try working with
a professional. They can potentially save you tens of thousands because they’re
required by law to follow a certain ethical code and continuing education,
meaning they’ll be up to date on the latest tax law changes and ways to keep
money in your pocket.
Reducing your tax bill is tedious. Between tracking every expense and making calculated purchases, you’re probably wondering if it’s worth the time and effort? Let a tax professional analyze your situation to help you choose the best option. This person can ensure your taxes align with any investments and retirement planning. Want to get the most out of your money? Click the link below, call at 1.800.467.8152 or email at firstname.lastname@example.org to chat about your tax situation and what we can do to potentially save you thousands!