You don’t have to love taxes for me to love taxes! But if you’re like most people, the last thing on your mind right now is preparing for tax season, but it will be here before you know it. And the good news is that you can take steps now to avoid tax-time stress. Here are a few steps to consider implementing before the end of the year if you have not already done so:
Step #1: Stay Organized.
- Use an expense tracking app or a spreadsheet to record and categorize expenses.
- Establish a filing system to store financial documents, like receipts, bank statements, and year-end tax forms. Whether you keep these documents electronically or filed away in a cabinet, pick the system that works best for you.
- Set calendar reminders to avoid missing important due dates.
Step #2: Plan deductible purchases. Depending on your tax situation, it may be beneficial to move forward with deductible items before year’s end. Deductible items could include expenses related to education, your home office, self-employment, or medical matters.
Step #3: Maximize retirement contributions. You reduce your tax burden when you make pre-tax contributions to your 401(k) or IRA accounts. 2024’s contribution limits are $23,000 for a 401(k) or 403(b) plan and $7,000 for an IRA. And those 50 or older can contribute an extra $7,500 to your 401(k) or 403(b) and $1,000 if you have an IRA.
If you aren’t on target to max out your retirement contributions before year-end, it may be time to bump up how much you put aside for retirement. The extra contributions drop your taxable income and could prove helpful if you are approaching the next tax bracket.
Step #4: Check your credits. You might be able to take advantage of a handful of tax credits offered by the IRS, such as:
- Education: If you have a new graduate starting college in the fall, you might be eligible for tax credits or deductions to offset the cost.
- Energy-Efficient Home Improvements: You could receive a tax credit for energy-efficient improvements you have made to your home. So, if you’ve installed a new water heater or put in energy-efficient windows or doors, you might qualify for a tax credit. Keep in mind that energy-efficient improvements must meet certain criteria.
- Clean Vehicle Tax Credits: If you bought a new or used electric vehicle — or plan to — you could be eligible for a tax credit.
Preparing for tax season doesn’t have to be challenging. By starting your fall tax planning now, you can get organized and take steps to maximize your deductions and credits.
If you’d like to chat further about getting ready for the upcoming tax season, feel free to reach out. Or if you have other tax-related needs, you can respond to this email or give the office a call. We are here to help.