No one wants to pay more taxes than necessary. With that in mind, today’s post discusses a few things to consider for year end planning that you should start now. Let’s discuss accelerating deductions and deferring income!
Accelerating Deductions: Pay Property Taxes Early
If you are able to, homeowners should consider early property tax payment. Paying taxes before the end of the year increases itemized deductions. Before accelerating this deduction though, homeowners need to consider if their itemized deductions would be greater than the standard deduction. Taxpayers often significantly reduce tax liability for the year that payments are made!
Accelerating Deductions and Deferring Income: Consider Your Health
Your health and expenses related to your health are a great way to accelerate deductions! For example, if you have major dental work or an impending surgical procedure scheduled for the next year, consider trying to move them to this year, thus paying the associated costs now instead of later.
If you have no impending procedures, you can still consider your health. For taxpayers with a Health Savings Account (HSA), you can have pre-tax monies added for healthcare-related expenses. If your employer doesn’t offer one, you can open one yourself, putting money away tax free, or earning a tax-write off.
What About Educational Expenses?
Can education expenses affect taxes? The answer is yes. Educational expenses reduce the amount of tax owed on your tax return. So pay that tuition bill early or consider the education credits available to taxpayers.
Year-end tax planning should focus on decreasing your income tax bracket. This means looking at income and deductions that give you the best possible results. Doing your due diligence and researching your specific situation is key whether that is postponing income to the following year or accelerating deductions for the current year. The bottom line is that your tax situation is unique. A small amount of effort and planning can help you reap the rewards, however if that task becomes too great, please contact me. I would be happy to help you create the best tax plan!