5 Ways to Plan for Tax Season Now

With the holidays looming, who wants to think about filing their income taxes? That can wait until spring, right? Well, actually, tax planning should always be an ongoing practice. And that’s especially true at the end of the year, because certain actions must be taken now if you want to potentially reduce your tax liability for the year.

Check on your paycheck withholding. Do you tend to owe more to the IRS each spring when you file your tax return? That’s a sign that your employer is not withholding enough taxes from each paycheck. For most people it’s better to check on this during the year and make an adjustment, rather than allowing an unpleasant surprise the following April.

Contribute as much as you can to your retirement account. Money that you contribute to your retirement plan isn’t counted as taxable income for the year. So you might as well prepare for the future while saving money on taxes now. For 2022, the maximum allowable contribution is $20,500, plus an additional $6,500 if you’re over age 50. Contribute as much as you can, and you can reduce taxable income by the same amount.

Take action now, to earn valuable deductions later. A number of expenses, such as mortgage interest, property taxes, and college tuition, can be deducted on your tax return. The key is to pay for these things during the tax year. So before December 31, evaluate your potential deductions and prepay some expenses if you need to claim more against your taxes.

Consider capital gains taxes. Have you sold any assets for a profit during 2022? If you held the asset for more than one year, it will be subject to capital gains tax. However, you still have time to sell an under-performing asset and claim the loss to offset those taxes.

Make charitable donations. If you want to claim charitable donations on your tax return, just remember you must make those donations by December 31 and keep a receipt or some other form of proof. The holiday season is the perfect time for giving, and also earning yourself a valuable tax deduction.

Of course, we definitely don’t recommend that you make any large financial maneuvers after simply reading a blog. If any of the above points sparked an idea for you, give us a call to discuss it in further detail. We can help you choose the right tax planning strategies for your situation.