How fast 2019 has passed! As the end of the year approaches, as well as the next tax season, it’s a good opportunity to talk about certain strategies that we can apply to lower our taxes and increase our tax refund.
Start gathering all your bills and receipts for any tax deductible expenses, as well as any source of income, because these 10 tips we bring you will help you organize your finances before the end of the year.
1. Defer Bonuses
If you’re expecting a year-end bonus, this extra money in your pockets may arise your tax bracket and increase the amount of taxes you have to pay.
If you can delay any extra income until the next year beginning, you’ll still have soon and you won’t have to pay income taxes when you file your 2019 taxes. Ask your boss if he/she is able to pay your bonus in January.
2. Accelerate Deductions & Defer Income
There are a few tax deductions you can seize the year you make the payment. For example, if you own a house, take advantage of the mortgage interests, and also extra payments made until December 31.
This will allow you to seize the tax deduction right away, instead of waiting a year until the next tax season.
Before opting for this strategy, remember that with the new tax reform, if you bought a new house after December 15, 2019, you may include the mortgage interests paid up to $750,000 instead of the $1,000,000 limit for homeowners who bought before that date.
3. Make Donations
Christmas season arrived and it’s a good opportunity to clean up your closet and get rid of the furniture you don’t like but people who need it the most will be happy to have.
You can help someone in need and reap the benefits of a tax deduction for non-cash and monetary donations given to a qualified charitable organization if you can itemize your tax deductions.
If you volunteer at a qualified charitable organization, don’t forget that you can also deduct your mileage (14 cents of every mile) driven for charitable service. Seize these deductions if you do it before the year ends, even if you donate with your credit card.
4. Take a class
Starting a new course to grow in your career and improve your job skills is a great way to lower your taxes and boost your tax refund.
If you pay your next quarters class fee before the year ends, you’ll enjoy the Lifetime Learning Credit up to $2,000.
5. Maximize your retirement
You can also reduce your taxable income by doing contributions to your retirement savings account. When you deposit to your 401(k) or traditional IRA, you can considerably deduct your taxable income and also save for the future.
If you’re self-employed and make deposits to a SEP IRA, you can also contribute with 25% of your total income as a freelance worker, up to $56,000 for 2019.
6. Use your Flexible Spending Account
If you have money in an FSA, use it to pay for a medical consultation before the end of the year. If funds remain in this unused account, you can only use it up to $500 of the total amount deposited in the account the next year.
In addition, your plan may also limit the amount of time you can use your funds up to 2 and a half months after the end of the year.
7. Buy and sell cheap
You probably have some investments in your portfolio that didn’t go well, however, you can still get a small profit from these outbursts. Did you know that you can recognize your investment losses and compensate them with the winning investments?
To do this, you will need to sell your bad investments and compensate your losses with your earnings. If your losses exceed your earnings, you can take advantage of up to $3,000 in losses to decrease your taxable income, and any surplus can be used for the following year.
8. Adjust your W-4 withholdings
If your 2018 tax result was not what you expected due to changes in tax law or changes in your life, whether because you had a baby, a raise or a new job, now is a good time to adjust the amount of taxes withheld on your paycheck by adjusting the withholding on your W-4 form and fill it with your employer.
9. Take advantage of the Other Dependents Credit (ODC)
Do you keep your parents or grandparents? How about another loved one? If you are in this situation and those you keep qualify as dependents other than your children, take advantage of the “Other Dependent Credit” which can reduce your tax debt up to $ 500.
10. Look for receipts for your property taxes or large purchases
Do you pay property taxes, state taxes or did you make a large purchase and did you pay a lot of sales taxes? You could deduct state and local taxes, and sales taxes up to $10,000. In the past, these taxes were generally full deductible.
Hire a tax specialist
Do you feel overwhelmed with so much information? Don’t worry, hire qualified tax specialist and experts to handle your tax credits and deductions.
We know that the needs of each taxpayer are unique, so we listen to you and work with you to ensure that your goals are met. Our team can help you with your tax return, as well as with your tax and financial planning.
We have worked hard for more than 25 years to establish our authority and experience as a CPA. Experiences and changes in life can affect your plans and financial needs, so our goal is to gain your trust and establish a long-term relationship with you.
Our offices are located at 8133 Leesburg Pike, Suite 920 Vienna, Virginia 22182, you can request an appointment by calling (703) 533-3636.