As November arrives, it's the perfect time to set yourself up for a smooth tax season. Here are some practical steps to prepare before the year ends, which can ease stress and maximize savings:
1. Review and Organize Your Financial Documents
Begin by gathering your income statements, receipts, and records of any deductible expenses. Ensuring your records are complete will save time and reduce errors when filing.
2. Check Your Tax Withholding
If you’ve had any major life changes (like a new job or additional income streams), it may be wise to adjust your tax withholding to avoid a surprise tax bill. Use the IRS Tax Withholding Estimator for an estimate and consider making estimated payments if necessary.
3. Maximize Retirement Contributions
Contributions to accounts like IRAs or 401(k)s can reduce your taxable income. For 2023, you can contribute up to $22,500 to a 401(k) (or $30,000 if you're over 50) and up to $6,500 to an IRA (or $7,500 if you're over 50).
4. Harvest Tax Losses
If you have investments that didn’t perform well, you may be able to offset gains by selling and realizing those losses. This "tax-loss harvesting" can help reduce capital gains tax.
5. Review Charitable Giving
Charitable contributions are a great way to reduce taxable income while supporting causes you believe in. Be sure to keep records of your donations and consider contributing to qualified organizations before December 31.
6. Consider Health Savings Accounts (HSAs)
If you have a high-deductible health plan, contributions to an HSA can be a triple-tax-advantaged way to save. You can contribute up to $3,850 for individuals or $7,750 for families in 2023, and even an extra $1,000 if you’re over 55.
7. Seek Professional Advice if Needed
Tax rules and regulations can change yearly, and everyone's financial situation is unique. Speaking with a tax professional or accountant can help you maximize your deductions and credits. We are the professionals you need to help you!
Preparing now can help ensure you take advantage of every tax-saving opportunity available and set yourself up for a hassle-free filing season. Happy planning!
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