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Here are some unique tax-saving strategies for year-end planning that you should consider:
1. Harvest capital losses.
If you have investments that have declined in value, you can offset those losses against capital gains you have realized in the current year. This can help to reduce your overall tax liability.
2. Bunch charitable deductions.
If you itemize your deductions, you can bundle charitable contributions made in multiple years into a single year. This can help you to exceed the standard deduction and claim a larger charitable deduction.
3. Contribute to a health savings account (HSA).
HSAs are triple tax-advantaged accounts, meaning that contributions are made with pretax dollars, earnings grow tax-deferred, and withdrawals used for qualified medical expenses are tax-free.
4. Consider a mega backdoor Roth IRA.
If your income is too high to contribute to a Roth IRA directly, you may be able to make after-tax contributions to your employer-sponsored retirement plan and then convert those contributions to a Roth IRA tax-free.
5. Claim the home office deduction.
If you are self-employed and use a dedicated home office for your business, you may be able to deduct a portion of your home office expenses.
6. Take advantage of state and local tax credits.
Many states offer tax credits for things like education expenses, child care, and renewable energy investments.
7. Review your withholding.
Make sure that your federal and state income taxes are being withheld from your paycheck at the correct amount. If you are overwithheld, you will get a refund when you file your tax return. If you are under-withheld, you may owe taxes when you file your return.
8. Consult with a tax advisor.
If you have complex tax issues, it is always a good idea to consult with a tax advisor. They can help you identify all of the deductions and credits that you are eligible for and make sure that you are taking advantage of all of the tax-saving opportunities available to you.
Remember, tax laws are constantly changing, so it is important to stay up-to-date on the latest changes. You can find information about tax breaks and credits on the IRS website.
If you haven't checked out my PennyWise Financial Podcast, watch a look at a clip from our latest show with guest Liz Biehler from The Liz Harley Agency with Allstate in Victor, NY. Scroll down to watch the entire episode. It's available on all major podcast platforms like Apple, Google Spotify, and YouTube.
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