7 Year-End Tax Tips for the Girl Who Likes to Plan Ahead
Even though tax day may feel like forever away, it’s never too early to start prepping for April 18. That’s why we’ve decided to take a small break from baking festive treats (these melting snowmen cupcakes are our fave!) and binge-watching holiday classics on TV to chat with TurboTax tax expert Lisa Greene-Lewis. We picked her brain about a few things we can do right now to make the most of our tax return before the new year.
1. Organize your ish. Sorry girl, but your shoebox full of receipts isn’t going to cut it come tax time. “It’s never too early to gather receipts for tax-deductible expenses and sources of income,” Lisa says. “Doing it now will help you ensure you’re not forgetting anything significant and help you see a better snapshot of your finances ahead of the new year.”
2. Postpone that exciting bonus. If you’re expecting a sweet bonus at the end of the year, you may want to ask your boss to postpone it until January. “The extra money in your pocket may bump you up to another tax bracket and increase your tax liability,” Lisa explains.
3. Accelerate your deductions and defer income. “There are a handful of tax deductions that are recognized the year in which you pay them,” Lisa says. For instance, if a homeowner gets a mortgage interest deduction and makes an extra mortgage payment on December 31, she can claim that additional tax deduction on THIS year’s taxes. Because why wait for extra shopping moola?
4. Donate to your favorite causes. If you make a donation to a qualified charitable organization before December 31 (even if you use a credit card and don’t pay it off until 2017), you will reap the benefits of a tax deduction for your non-cash or monetary donations. “Plus, if you volunteer at a qualified charitable organization, don’t forget that you can deduct your mileage (14 cents of every mile) driven to charitable service,” Lisa says. You can use online tools, like TurboTax ItsDeductible, to accurately value and track your yearly donated goods.
5. Take a class. “Taking a course to advance your career and build your business is also a great way to boost your tax refund,” Lisa notes. “Paying for next quarter’s tuition by December 31 may give you a valuable tax credit up to $2,000 with the Lifetime Learning Credit.”
6. Maximize your retirement. Even if retirement seems sooo far away, investing in your retirement now is a great way to reduce your taxable income. “Whether you contribute to a 401(k) or a traditional IRA, you can take a dollar-for-dollar reduction in your income and also save for the future,” advises Lisa. “Additionally, self-employed [people] who contribute to SEP IRAs can deduct up to 25 percent of compensation or $53,000 for 2016.”
7. Spend your FSA. “If you have a Flexible Spending Account and you have money left, get caught up on your doctor’s visits,” Lisa suggests. “While the old ‘use it or lose it’ rule may not still apply, if you have unused money in your FSA account on December 31, you may only be able to carry over up to $500 into your 2016 FSA, or your plan may limit the amount of time to two and a half months after the end of the plan year to use your funds.”
Have you started organizing for tax season yet? Tweet us @BritandCo!
(Photos via Getty)