The year-end is a busy time for Americans as the holiday season is in full swing. You will probably find yourself struggling to close the festive shopping, holiday decor, and party planning. Tax planning is likely to be the last thing on your mind, but there couldn’t be a better time to get things in place. Sorting your taxes now can save you from a lot of trouble eventually. Moreover, you can take some steps to cut down your tax bill. Here are some recommendations to help you stay on the right side of the IRS rules.
Defer your income
You have to pay taxes on income received in a year, but you have the option to defer some elements. For example, you cannot defer income from wages and salary, but you can postpone your year-end bonus. Freelancers and self-employed professionals have more leeway. You can delay billings until the end of December and receive payment only next year. Likewise, taking capital gains in the New Year is a good idea. But defer income only if it will not put you in a higher tax bracket later.
Grab last-minute deductions
Getting more deductions is another good way to cut down your taxes. The festive period brings ample opportunities to do it. Contributing to charity is the best idea to get a deduction, provided you time it right. Donating assets like appreciated stock or property can amplify the benefits. Make sure that you have a receipt of the donation to back up any contribution.
Talk to a tax expert
Everyone knows about the basics like claiming deductions and deferring income. But an expert can guide you about more ways to save a fortune and steer clear of IRS troubles. Experts at Del Real Tax Group in Chicago recommend that every American schedule a consultation with an expert in December. They assess individual situations and offer the right advice to maximize your benefits. With experts showing the way, you have peace of mind about your tax situation as you step into the New Year.
Maximize contributions to retirement accounts
Tax-deferred retirement accounts make the ideal investment for savvy people. They grow substantially over time, and they help you save up on taxes. The year-end is a good time to increase your 401(k) contribution. You can make a maximum contribution of $19,500 this year, while the amount can go up to $26,000 if you are over fifty. If you cannot afford the maximum amount, try to match your employer contributions.
Harvest your capital losses
Your capital losses can serve as a saving opportunity if you are smart enough. If you own losing stock, sell them now as you can deduct up to $3,000 on taxes. The amount can help in offsetting the gains on other stocks. You can also harvest losses on cryptocurrency the same way. But make sure that you do not violate the wash-sale rule while harvesting the losses. You will end up losing your deduction if you do it. Smart year-end moves can cut down your tax bills significantly in the New Year. Consult an expert and act now to reap the benefits of these ideas.
