You don’t have to wait until December to start thinking about tax planning. You can get started today!
As we enter the final quarter of the year, what should you consider?
- What are your financial goals? Do you want to save for retirement, increase charitable giving, plan for upcoming medical expenses, save for college, etc.?
- How much can you afford to put toward tax-saving strategies? $1,000? $10,000?
- What strategies are you already using? Can you contribute more to those?
After you’ve answered the questions above, here are some ideas that might work for you:
- Are you covered by a retirement plan at work? If so, could you increase how much you’re contributing? If you contribute with pre-tax deductions, that will lower your taxable income!
- Have you considered contributing to an IRA? You may qualify for a deduction depending on your income level and if you have a retirement plan at work. Your spouse may also be able to contribute even if they are not employed! If you’re looking for an option that will save you tax years down the road, you may want to consider a ROTH IRA.
- Do you have an HSA-eligible health insurance plan? If so, make sure you are contributing to an HSA (Health Savings Account). Your money grows tax-free AND you can get a reduction in your taxable income! Win-win!
- Have you considered contributing to a 529 account for your dependents, grandchildren, nieces, nephews, etc.? Funds can be used for 4-year and 2-year schools along with trade schools. If you have a child in grades K-12, you can contribute to a 529 for those expenses and withdrawal up to $10,000 per year to pay for those expenses.
- Even if you don’t itemize, you can still qualify for a deduction for charitable contributions up to $300 per person (taxpayer and spouse). Find a 501(c)(3) non-profit organization that supports a cause you believe in to give them some additional year-end support and lower your taxable income.
Have you heard the phrase “save early and save often” in relation to protecting a document on your computer? That’s the best way to protect anything you’re working on from being lost forever if you unexpectedly lose power. Well, the same can be said for retirement, emergency funds, and big purchases. The more you save up front, the better off you are down the road. Let the power of compound growth work for you and your family. It’s never too late to start saving if you’ve gotten a little behind and it’s never too soon for a dependent of yours to start saving. If you have a dependent with earned income, they are eligible to contribute to an IRA. What a way to get them started!
As you consider your options, don’t hesitate to reach out with any questions! We’re happy to help you evaluate what might be best for you.