Accumulating your savings is great, but planning to reach your financial goals is better. October is the national financial planning month, which acts as an annual checkpoint to make sure you are on track to meet your financial goals. What better way is there to plan than to check your taxes?
If you are waiting for January to look out for taxes, think again! Now is the right time to plan everything and take action to reduce your taxes. Contact the best tax consultant in Harrison, NY and discuss with him the strategies you can follow to lower your tax bill.
However, here are few tips for tax planning that will help you in your 2019 taxes, which you are going to cover in 2020:
Maximize contributions to your retirement account
One of the best ways for financial planning is to stock the money in a retirement account for your future and accumulate tax savings at the same time. Contribute as much as possible to your retirement plans to reap the financial fruits in the future.
You can contribute up to $19,000 and an additional $6000 if you are 50 or older to an employer-provided retirement account. An amount of $6000 and an additional $1000 can be contributed to an IRA if you are 50 years of age or older.
Enhance your tax deductions
Has an unexpected bonus this year moved you to a higher tax bracket? Don’t worry! Move some of your tax-deductible expenses from next year to this year which will result in a reduction of your taxable income and tax bracket if you get your tax deductions itemized. Make donations this year rather than next year and pay for those doctor’s visits. Moreover, property taxes assessed for 2019, pay them in the second half of your 2019 property taxes only. Pay your January mortgage payment in December and reduce your taxes.
Keep in mind that under the tax law changes, standard deduction s has been increased. So, if you get your tax deductions itemized and able to claim charitable contributions, you may have to take the standard deduction.
Get an education tax credit
You may be eligible for the American Opportunity Tax Credit or the Lifetime Learning Credit if you are paying for the post-high school education for your child and/or for yourself. Moreover, if you or your dependent is attending college in Harrison, NY next year, just pay for the first quarter tuition in advance before the year ends and benefit from the education credits on your taxes for the coming year.
Set up home-Office
If you are working at home and using part of your home exclusively for your work/business, you get eligible for a deduction of home-office expenses. It was otherwise used to be considered as personal expenses including part of a utility bill, and insurance premium before the tax changes.
Do not excuse away from these breaks because of fear of an audit. IRS has made it really easy to claim this tax break. Consult your tax consultant in Harrison, NY to know more about this claim.
Health Savings Account
If your employer offers an insurance plan, check if that could be combined with Health Saving Account or open one yourself with your coverage. This account allows you to contribute money pre-tax for medical bills, deductibles, co-pays and other expenses that are not covered by insurance such as dental care.
The money you put in HAS escapes all taxes that are federal, state and local taxes including FICA taxes. It offers a triple tax break. Moreover, the money you withdraw from the HAS to pay medical expenses is purely tax-free.
The concept behind tax planning is to arrange your financial affairs so you owe as little as possible at the end of the tax year. Taxes are inevitable, so it is better to start planning early and not to wait for the d-day.