5 Tax Moves To Make Right Now

As we approach the end of summer and the beginning of fall, things are changing. Temperatures begin to cool, leaves start to turn color, and the kids start back at school. While we do not have much control over these changes, we do have the ability to make some changes to improve our financial well-being.

With about three quarters of the year in the books, now is a great time for tax planning. You should have a good idea of what your income (including bonuses) projects to be for the year, plus there is enough time to make some changes before the end of the year. Here are some ideas:

  1. Increase 401(k) Contributions. If your income projections show that you are on pace to creep into a higher tax bracket, consider decreasing your taxable income by increasing pretax contributions to your 401(k) plan. Most plans allow you to change your contribution amount at any time, as long as you stay within the IRS limits of $18,000/year, plus $6,000 more if you are 50 or older. Then, when the new year arrives, why not keep your 401(k) contribution rate at this higher level if it fits within your budget?
  2. Increase Health Saving Account (HSA) Contributions. Similar to 401(k) pretax contributions, HSA contributions can be used to keep you in a lower tax bracket, and can be changed at anytime through your payroll deduction. You can even write a check and have it deposited into your HSA up to April 15th of the following year. Since the unused balance in your HSA can be rolled over to subsequent years, and can be invested, view it as a supplemental retirement account as all qualified medical distributions will be tax free, regardless of your age.
  3. Use all the money in your Flexible Spending Account (FSA). Unlike the HSA, your FSA has a use it or lose it provision. So, look at your current balance and future contributions for the year, and match current year medical expense to at least meet this amount. If it looks like you’ll have unused funds, reschedule that minor procedure or visit to the doctor you were planning for this year instead of next so you can use the tax-free money (assuming, of course, rescheduling does not negatively affect your health). Load up on contact lenses or upgrade your glasses this year, rather than waiting until next year. For more ideas on eligible ways to spend extra money, check out this list for ideas.
  4. Offset capital gains with capital losses. If you sold some stock or other asset earlier this year that generated a capital gain, you can offset this gain with a capital loss. By using capital losses to offset capital gains you will lower your net investment income and tax liability. You can even use up to $3,000 of a net capital loss as a taxable income deduction.
  5. Hire a tax preparer. Don’t wait until you’re facing the April 15th deadline to figure out who you’re going to have prepare your taxes for the year. Interviewing and hiring during the fall gives you time to acquaint yourself with your preparer, which makes it more likely that he/she will be able to give you personalized tax planning ideas to actually help you save on your taxes. Waiting until mid-March or later not only limits this opportunity, but may also cost you a premium — some preparers charge more for people who submit their stuff after a certain date.

Asses your overall tax situation now, and put a plan in place to avoid “scramble mode” at the end of the year.

 

Want more helpful financial guidance, delivered every day? Sign up to receive the Financial Finesse Tip of the Day, written by financial planners who work with people like you every day. No sales pitch EVER (being unbiased is the foundation of what we do), just the best our awesome planners have to offer. Click here to join.

More like this:

Working In The U.S. Temporarily? Here’s What You Need To Know About Retirement

Working In The U.S. Temporarily? Here’s What You Need To Know About Retirement

We get many retirement benefits questions on our financial coaching line from professionals working in the United States but plan ...
Read More
5 Estate Planning Steps Literally Everyone Needs To Take

5 Estate Planning Steps Literally Everyone Needs To Take

You may be thinking that you do not have the need for an estate plan or at least there is ...
Read More
Be A Tax Savvy Investor

Be A Tax Savvy Investor

Take advantage of long-term capital gains rates Hold stocks and mutual funds for more than twelve months to have your ...
Read More

Subscribe

Be the first to know when new resources are published.