Tax season is not over – it is just starting. As a “super strategist” I can’t emphasize enough that the biggest tax reduction opportunities start earlier in the year, NOT on April 15th. By then it is too late. Here are five things to think about now to get the best head start on reducing your taxes.
1. Are you having enough tax withheld?
It may take only a small adjustment to get the right amount withheld now and that beats the heck out of a big tax bill at tax time.
2. How much are you contributing to your retirement plan?
The biggest reduction opportunity for many W-2 wage earners is making contributions to your employer plan. Max this year is $20500 and a catch up contribution of $6500 if you are 50 years old or older. If you are self-employed there are many plans you can design and own but you need to start early.
3. How are you invested?
Dividend-paying funds work best inside of deferred accounts as you save and index funds generate less taxable income so use them in your non-retirement portfolios.
4. Have your non-retirement funds suffered any losses?
If your non-retirement funds have suffered losses sell off for a month and store up the losses to offset future gains. You can’t buy back the same investment for 30 days but you can still stay invested in something similar to capture market gains.
5. Do you have an HSA?
If you have a health savings account, add money if your bills exceed the employer contribution. The max deduction is $3,650 for self-only and $7,300 for families. The annual “catch-up” contribution amount for individuals age 55 or older will remain at $1,000.
Get going now and see the results!