Some people think they can wait until March to worry
about taxes. Wrong.
The end of the year is a perfect time
to make some last-minute efforts to reduce your tax burden.
It is said that giving is better than receiving. In the case of charitable contributions,
giving can also be receiving. By making an end-of-year donation to an IRS approved charity, taxpayers are eligible to deduct the donation on their taxes.
Some rules do apply:
• The Internal Revenue Service requires you to maintain a bank record or
receipt of the gift.
• For any contribution of $250 or more, you must obtain and keep records or
written acknowledgement from the charity.
Opening a traditional retirement account can be an easy way to reduce your
tax liability. Traditional account types include an Individual Retirement Account
(IRA), 401(k), 403(b), savings incentive match plan for employees (SIMPLE) IRA
or simplified employee pension plan (SEP).
Make sure you know when the yearly contribution ends for your plan.
Employer associated plans like 401(k) and SIMPLE IRA have contribution
years ending with the calendar year, while traditional and Roth IRAs and SEP
plans allow you to contribute up to April 15.
Contribution limits for each type of retirement account are different based on
circumstances, so talk to your financial advisor to see how much you are able
to contribute to your plan.
Give a Gift
You can gift your child up to $15,000 per year without having to pay tax on the gift and most of the
time, the child receiving the gift does not have to pay taxes on the gift either. If you’re married, you may
gift your child $30,000 per year as a married couple. Further, if you have multiple children, you may gift
up to $15,000 per year to each without being subject to the Federal Gift Tax.
Currently, the IRS offers numerous tax credits for businesses and individuals to reimburse them for
qualified spending throughout the year. And every possible tax deduction can help reduce your tax
burden, yet many available legal deductions go unclaimed each year simply because most taxpayers
still don’t know the breaks exist. From eyeglasses to airline baggage fees, you might qualify for at
least one often-forgotten deduction and maybe more than one.
The Internal Revenue Service allows you to take the cost of certain items, known as itemized
deductions, off your tax bill if you qualify. You should itemize deductions if they add up to more than
your standard deduction, the IRS advises.
Itemizing also makes sense if you can’t use the standard deduction. Do you have student loan interest
or alimony payments? Maybe you needed to buy crutches or hearing aids this past year or paid
hospital fees for physical therapy? Or you had casualty or theft losses? Or had large unreimbursed
employee business expenses?
To get the most out of your tax deductions, stay organized and do your research. No one likes getting
audited, although if the IRS does red flag you, some costs of professional advice to defend yourself
are, in fact, deductible.
Consult your financial advisor.
Don’t hesitate to reach out to me. I’m always available to discuss
your options because your tax strategies play an integral role in
your overall financial planning