Planning for income taxes throughout the year helps to minimize the amount you pay in April and avoids any surprise costs. Read below for the top three tips for year-round tax planning. And contact us below if you need assistance. We’d love to help you.
1. Do an Income Tax Projection
This tip is the most important one because it offers insight to your current tax standing. No more wondering what your tax bill will be in April. You learn the estimated amount much earlier, giving you time to adjust your expenses, retirement contributions and donations to minimize your income tax bill.
Heads up, though. You’ll probably need to ask an accounting or tax professional for help with this projection.
2. Reduce Your Tax Burden
This tip is where most people start. However, we don’t suggest that. Begin with a tax projection because it informs this step.
To reduce your tax burden, reduce your taxable income. Consider how you contribute to your retirement account, Health Savings Account (HSA), 529 plan, Flexible Spending Account (FSA), and your Dependent Care FSA (DCFSA).
Also, decrease your capital gains tax or the amount you made on selling an item or property greater than the amount you spent to purchase it. There are several ways accountants (like members of our team) can help you spread your sale over time or to transfer assets.
3. Understand the Best Ways to Give
People often assume that donating to nonprofits or gifting money to loved ones reduces your tax bill. And while these actions may decrease it, they’re not guaranteed to help.
Therefore, pay close attention to the laws on financial gifts to loved ones. And with the current standard deduction, it may not be in your best interest to itemize your contributions, which is required if you want to deduct for your charitable contributions.
Please speak with one of us if you’re looking to gift an individual a large sum of money or want to donate a sizeable amount to a charity.
Morgan & Associates Can Help You with Year-Round Tax Planning
We at Morgan & Associates suggest preparing for taxes all year long. Yes, it makes our job easier. But more importantly, it helps you – the taxpayer. No surprise costs at tax time! Plus, you keep more money in your pocket when you plan.