Many people wait until the year-end to start arranging their taxes, which is a big mistake. Staying on top of your taxes all year round will ensure you pay the minimum amount owed. Here are a few tips to keep in mind.
Get organized
It’s likely you’ve navigated the complexities of tax season many times before, so review last year’s tax returns ahead of time to ensure you’re aware of your obligations. Organize your receipts and spreadsheets and keep a record of your capital gains so far this year.
Harvest capital losses
The federal tax code allows you to deduct $3000 of capital losses from your taxes. For most people, this is from losses on stocks, so review your brokerage accounts now. Do you have some nice capital gains? If so, you will have to pay taxes on them. Consider selling any losers, if you have any, which will offset your total gains so that you pay less in total tax.
Use your flexible spending account
If you have funded a flexible spending account, be sure to use it before year-end, or you will lose it. If you don’t use the money, it will revert back to your employer at the end of the year.
Plan your itemized deductions
Did you itemize last year? If so, make sure you review this. Check to see if you will have similar line items for the upcoming year. Did something change, such as a big donation to a charity or the refinancing of a mortgage, which may enable you to reduce your taxes?
Max out on 401K and HSA contributions
Tax-deductible contributions to both 401Ks and Heath Savings Accounts must be made during this calendar year. Many workers take advantage of these plans to maximize their tax savings, so see if you can do this too.
These are just a few of the many ways to save on taxes, but working with a knowledgable San Diego CPA can make all the difference. Contact us today to learn more.
