Hard to believe we’re almost to the fourth quarter! Before you know it, tax time will be here again. Now is a great time to reflect on what’s changed for you this year (or on what could change before the end of the year) and start making some moves to help you save on your taxes. Here are five areas where you can start:
- Take stock. What sort of milestones did you experience in your life this year? Marriage? Divorce? A job change, or retirement? A new baby? All of these things will affect your 2016 taxes, so if possible, start organizing your documentation now so you’ll have it available when tax time rolls around.
- Review your medical expenses. If you have medical expenses that are greater than 10 percent of your adjusted gross income for 2016, you can use them as deductions. If you’re getting close, now may be the time to schedule any needed medical tests, appointments or other medical expenses, such as glasses or hearing aids, so you’ll be able to deduct them on your taxes.
- Review your healthcare benefits. Open enrollment season is almost here again, so review your employer’s offerings with a critical eye toward tax savings. A Health Savings Account (HSA), for example, enables workers to contribute pre-tax through payroll contributions, and contributions are tax deductible. In addition, any distributions for qualified medical expenses are tax free!
- Maximize your retirement contributions. As part of taking stock, you may discover that your tax obligation may be higher this year (for example, if you have sold or plan to sell some of your investments at a gain). You can offset that tax burden by upping your contribution to your 401(k) or IRA, which effectively lowers your taxable income. (And as a side note, even if you aren’t facing a higher tax burden this year, it’s still a good idea to max out your contributions – especially if your employer provides a match!)
- Pay ahead. If you pay taxes quarterly, be sure to make your fourth-quarter payments in December if you itemize your deductions. You should also consider making college tuition payments in December to take advantage of the education credit for this year. If you’ve already maxed out the education credit for the year, waiting until January would enable you to start on next year’s credit.
In addition to the five to-dos listed here, think about any charitable gifts you’d like to make and plan them before the end of the year. If you didn’t get around to spring cleaning, you can still clean out a few closets and donate your unwanted items to charity to receive an additional write-off.
Tax planning can make a huge difference in helping you achieve your financial goals. At AMDG Financial, we help clients become better stewards of their money by integrating their tax, financial and investment strategies to achieve maximum results. If you’d like to review your tax situation with us, please feel free to contact us – we’d be glad to work with you!