December can be busy. However, if one of your goals is to put more money in your pocket and reduce government coffers, you need to focus on completing last-minute tasks that take minutes.
- Maximizing retirement benefits With only one or two payroll periods left this year, your priority should be to fund your employee or self-employed retirement account.Some tax-free transactions he can make after December 31stst Still relying on tax returns, but not many. Traditional IRA contributions can be made through April 18, 2023, provided you are subject to the Modified Adjusted Gross Income (MAGI) limit and have plans at a restricted workplace that are not self-employed. Roth IRA contributions are non-deductible.
- Sale of investment losses Either offset the capital gains you’ve already sold, or sell your investments with gains to capitalize on the losses you want to sell. This is called “tax loss harvesting” and should include professional (advisor and/or chartered accountant) instructions to maximize deductions and avoid new taxes. A loss of up to $3,000 can offset your regular income to reduce your income tax, and the rest can be carried forward into 2023. In the absence of capital gains, larger losses can be offset.
- prepay the deductible if you are nearby standard deduction limit $12,950 single, $25,900 married, $19,400 head of household.What kind of bills can I prepay? Mortgage payments to recognize interest payments, and unpaid medical expenses Greater than 7.5% of Adjusted Gross Revenue. Property taxes, up to $10,000 in state and local taxes, are another consideration. Parents of college students may want to pay the first quarter or semester of tuition in advance. American Opportunity Tax Credit If a married couple applies jointly, the MAGI limits start at $160,000 and are worth up to $2,500.Don’t forget your own learning tax credit opportunities by using lifelong learning credit Up to 20% of your tuition, fees, and book copays, up to $2,000. Again, MAGI limits for married couples start at $160,000.
- Combine multi-year charitable contributions into a large lump sum payment. The easiest way to move your charitable giving to one year and go beyond the standard deductible limit is to create a ‘donor preferred fund’.major securities companies such as Vanguard and fidelity We offer this service to our clients to avoid sales tax and use securities with large capital gains to pay designated charities at your direction. There are also community foundations that offer this service. You can also send money directly to individual charities and tell them the donation is for several years.
- Contributions to the 529 Fund receive state tax credits. 35 states provides some form of state tax credit for contributions to the 529 College Saving Plans. Remember these funds will be tax exempt. Also, no tax will be charged on both state and federal tax returns when withdrawn for eligible educational expenses. These funds can cover tuition, fees, books, room and board.
Good luck with your tax savings this year. Most of these are only valid until his December 31st, so spend a few minutes ASAP.stHappy tax planning!
The post-5 year-end tax movements were first published in Mainstreet Financial Planning.