As the year draws to a close, it’s a good time for you to review your financial situation and implement efficient tax strategies. With this in mind, here are a few tips to help you get into a good financial position at the end of 2023.
Tax Planning: The Key to Savings
The foundation of any tax-saving strategy is effective tax planning. By understanding your current financial situation, and projecting your income and expenses for the upcoming year, you can make informed decisions that can significantly reduce your tax liability.
Maximize Deductions
- Business Expenses – Ensure that all deductible business expenses are accounted for. This includes costs related to office supplies, equipment purchases, travel, and any other allowable business-related expense.
- Charitable Donations – Making charitable contributions before the end of the year can provide a tax break if you are able to itemize deductions. Ensure you have documentation for all donations when needed.
Tax Credits
Tax credits directly reduce the amount of tax you owe. Familiarize yourself with available credits and determine whether or not you qualify! There are many types of federal tax credits available, including the Child Tax Credit, Earned Income Credit, education credits such as the American Opportunity Tax Credit, and more.
Contribute to Retirement Accounts
Making pre-tax contributions to retirement accounts like a 401(k) or a traditional IRA will reduce your taxable income. The maximum annual contribution amount for each type of retirement account is adjusted each year—be sure to look up the current limit if you would like to take full advantage of this option. Taxpayers over age 50 are generally also able to contribute a set additional amount as a “catch-up” contribution.
Review Investment Portfolio
The last few months of the year are an excellent time to review your investment portfolio. This helps you form an overview of your financial situation and keep in mind where your assets are located. You can also consider selling off underperforming assets to offset capital gains and minimize your tax liability.
Stay Updated on Tax Law Changes
In recent years, there have been some major changes to tax laws that could affect you. You should stay informed about these changes, whether through your own research or by contacting a local tax firm who can help you out. You won’t want to miss out on any new deductions or credits that could help you reduce your tax liability or increase your refund.
It’s never too early to start planning ahead! By implementing the strategies above and working with a trusted tax firm, you can ensure you’re in the best possible position heading into 2024 and the upcoming tax season! For more information, reach out to us through our contact us page.
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