How to Save on Taxes Year Round with Proper Planning
Filing your tax return is a once-a-year event and many of us are happy to move on and not have to think about if for another year. But the truth is that you may be able to get bigger savings with tax planning all year round. The following ideas could really pay off in the months ahead.
Give yourself a raise
If you got a big tax refund this year, it meant that you're having too much tax taken out of your paycheck. Filing a new W-4 form with your employer will insure that you get more of your money when you earn it.
Fund an IRA
If you don't have a retirement plan at work, or you want to augment your savings, you can put money in an IRA. Depending on your income and whether you participate in a retirement savings plan at work, you may be able to deduct some or all of your IRA contribution.
Switch to a Roth 401(k)
Consider shifting some or all of your retirement plan contributions to a Roth 401(k). Even tough you don't get a tax break when your money goes in money coming out of it in retirement will be tax-free, while cash coming out of a regular 401(k) will be taxed in your top bracket.
Keep careful records of the cost of medically necessary improvements
To the extent that such costs, like adding a wheelchair ramp, widening a doorway or installing hand controls for a car, exceed any added value to your home or vehicle, that amount can be included in your deductible medical expenses.
Choose the right kind of business
Beyond choosing what business to go into, you also have to decide on the best structure for your business: a Sole Proprietorship, an S Corporation, a C-corp or a Limited-Liability Company (LLC). Your choice will have a major impact on your taxes.
Watch start-up costs
The costs of starting up a new business must be amortized, that is, deducted over years in the future. But you can deduct up to $5,000 of start-up costs in the year you incur in them, when the tax savings could prove particularly helpful.
Make use of the home-office rules
If you use part of your home regularly and exclusively for your business, you can qualify to deduct some costs that are otherwise considered personal expenses as home-office expenses, including part of your utility bills, insurance premiums and home maintenance costs.
Pay estimated taxes
If you receive significant income not subject to withholding, from self-employment or investments, for example, you probably need to make quarterly estimated tax payments to avoid an IRS penalty. Use this tool to stay current with your tax obligations and to minimize your tax expenses.
Our Financial and Tax Advisory team can help you plan your fiscal year and ensure that you are taking advantages of all the provisions establish in the law. Contact us so we can start working on your fiscal health today.