It isn’t too late to make an impact on this year’s tax bill
As the old year comes to a close, smart money managers know that there are a lot of things you can still do to make your tax bill a little bit lighter. Furthermore, if you’re carefully tracking both your tax moves and your income, you might find that any of these actions could drop you into a lower tax bracket — further lowering your tax burden.
It is more than worthwhile to consider what you can do during the last days and weeks of the year. Before businesses close on December 31st, here are some things to make April 15th easier to take.
Start with a checklist
There’s an unexpectedly long list of moves you can make to lower your tax bill. While it isn’t possible to get into details on all of them, here’s a quick checklist of widely known, smart money moves that will reduce your taxable income:
- making and tracking additional charitable deductions
- contributing to your retirement account
- classroom supply purchases (make by educators)
- being sure that you paid your quarterly tax bills appropriately
- tracking and reporting your childcare expenses
- tracking and reporting significant medical expenses
- tracking and reporting educational expenses (college, continuing ed. etc.)
In addition to this checklist, here are two more end of the year moves that you can do to make things easier come April 15th:
Go shopping for your business
With the holidays in full swing, there’s lots of shopping happening at the end of the year. However, there’s another reason to buy at this time of year. Making purchases for your business can help lower your tax bill.
Any kind of business purchase can be deducted from your business’ revenue, ultimately lowering the amount of household income you owe taxes on. Don’t merely consider big purchases; small purchases can add up to more than you’d think. Consider what you’d need to buy and then go for it.
Also, keep in mind that if you work for someone else, purchases that you use for work also count as deductible business expenses. These kinds of expenses are worth tracking because they can also add up unexpectedly.
Track any investment losses
While it may be tempting to want to put your bad investments behind you, spending a little bit longer thinking about them at the end of the year can benefit you. That’s because once you calculate and document the exact amount of your investment losses, you can deduct them from your income and lower the amount you can be taxed on.
As you’re totaling your investments that haven’t done so well, consider everything you can think of, including individual stocks, investment funds, real estate, other businesses you have invested in, and more tangible items. Also, remember to put these losses in the context of the gains you have elsewhere. If you keep the full context of your year in mind, the harder parts will be easier to think about.
Questions? Consult a professional
Be sure to consult your accountant or tax pro. They may be able to suggest additional actions you can take that make sense for your situation.
Figuring out what deductions you can take, what money moves to make in the last quarter of the year to make, and how to keep complicated isn’t easy. However, you want to make sure you’re doing the right thing so that you can protect yourself. If you have any questions, be sure to consult your accountant or tax pro. They may be able to suggest additional actions you can take that make sense for your situation.
A deeper dive – Related reading from the 101:
- 8 financial mistakes to avoid around the holidays | Finance 101
Keep away from these mistakes, and you’ll keep your finances on track
- Want to save money on taxes? Do this | Finance 101
Here are some smart money moves to help you pay less at tax time