Most of us think about tax time once April rolls around, but December 31st is another big day on the tax calendar. Certain spending and information have to be done by the end of the year in order not to lose out on tax breaks that can really help lower your tax bill.
Last year’s average tax return was over $3,000. And 43% of taxpayers owed no taxes last year after deductions!
Are you looking to join these tax-savvy people and save money on your tax bill? Read on for six tax tips that can help you save hundreds.
6 Tax Tips To Save You Money
Let’s take a look at six ways you can save money through smart tax planning.
1. Maximize Those Tax Breaks
Are you getting all of the credits and deductions that you’re entitled to? There are some new and some obscure tax rules that may apply to you – so make sure you search closely!
Some of these include the Other Dependent Credit (ODC), which helps people who are caretaking for a parent or other family member who is sick or aging. Did you take a class this year – or are you enrolled for next? You can deduct qualifying tuition payments as well.
There are thousands of deductions and credits out there. Make sure you’re claiming all that you’re entitled to.
2. Sell at a Loss
Have some of your stocks tanked this year, with no hope of coming back? You can sell stocks at a loss in order to save some money. This is called “loss harvesting” and it provides a way to offset any capital gains you’ve also received.
If your loss exceeds your gain, you can claim up to $3000 of stock price loss to lowering your tax bill.
3. Save for Retirement
Contributions to certain retirement accounts will also reduce your taxable income. You can boost your retirement savings while also saving money on your tax bill! In order to maximize the benefit, look into your company’s 401(k) program, which often offers matching contributions.
4. Check Your Flexible Spending Accounts
Flexible savings accounts, or FSAs, are benefits offered by many companies. You can contribute money pre-tax to your flexible spending accounts, lowering your tax bill. However, many of these accounts are “use it or lose it,” meaning if you don’t make claims on it before April 1 of the next year, you could forfeit that money.
Check to see that you’re contributing the correct amount – the amount you will definitely use in a year without losing any. If you’ve got a lot leftover in your account currently, consider changing the deduction amount for next year. And it also might be time to schedule some doctor and dentist visits.
5. Defer Income
If you’re getting a year-end bonus, check with your HR department to see if they can legally defer the payment until 2020. That way, the bonus won’t be part of your taxable income for this year.
If you’re a contract employee or freelancer, and you can afford it, delay billing some clients for your work. The payments that hit after December 2020 will be next year’s problem!
6. Organize Your Information
Simply getting organized is a key way to ensure that you’re filing correctly and getting all your deductions. It’s easy to create an accurate w2 form online here to ensure your deductions and information are in order.
The best way to save money is by looking ahead and being ready for tax season in April. These six tax tips are a great start to making sure you’re ready to save as much as is legally possible on your taxes next year!