How to Prep for Year-End Taxes Like a Pro
As the year winds down, it's time to get your financial ducks in a row and prep for tax season. Fortunately with a little organization and planning ahead, you can make filing your taxes easier and maybe even save some money. Here’s some effective tips to help you get tax-ready before January.
Get Organized
Have a designated spot where you stash receipts, statements, and important documents throughout the year? Now's the time to dig them out and get organized. Create a dedicated folder (digital or physical) for tax-related documents and start sorting through them.
Identify Deductions
Deductions are your allies during tax season! Do some research or chat with a tax professional to find out if you’re eligible for any deductions or credits. A few common deductions include mortgage interest, student loan interest, and charitable contributions. Additionally, if you've made any big life changes this year like buying a house or getting married, don't forget to see how these may factor into your deductions.
Contribute to Retirement Accounts
Contributing to retirement accounts like a 401(k) or IRA is a great way to reduce your taxable income, score deductions, and save for the future. Maximize the benefits by contributing as much as you can within the annual limitations.
Review Investments
If you've got investments, now's the time to check how they're doing. If you've got some investments in the red, you can offset your capital gains by getting rid of the ones performing poorly. Doing this can help you lower your tax liability. Before making any changes, we recommend consulting your financial advisor.
Check Your Withholding
Remember that W-4 form you filled out when you started your job? Well, if your life circumstances have changed (ie: new baby or new house), your withholding might need to be updated. Ideally, you want to find the right balance so you aren’t owing or receiving a large refund when you file your taxes.
Prepare Ahead of Time
Waiting until the last minute to prepare for tax season can lead to stress, mistakes, and missed opportunities to save. Make sure to set aside some time to tackle your tax-related tasks in advance. This will also be beneficial should you need to reach out to a tax professional for guidance.
Getting tax-ready might not be the most exciting thing on your to-do list this fall, but it can provide many financial benefits. With these tips, you'll be well on your way to a smoother tax season and hopefully an even bigger refund!