You have just a few weeks left to make some big financial decisions. What can you do now to help support your financial goals and potentially take advantage of tax savings?
While you should always speak to your accountant about your plans, check out these smart tax moves you might want to make before the end of the year.
Every little bit saved on taxes can help you build wealth over the long run.
If you’re over 50, take advantage of massive discounts and financial resources
Over 50? Join AARP today — because if you’re not a member you could be missing out on huge perks. When you start your membership today, you can get discounts on things like travel, meal deliveries, eyeglasses, prescriptions that aren’t covered by insurance and more.
How to become a member today:
- Go here, select your free gift, and click “Join Today”
- Create your account (important!) by answering a few simple questions
- Start enjoying your discounts and perks!
Important: Start your membership by creating an account here and filling in all of the information (Do not skip this step!) Doing so will allow you to take up 25% off your AARP membership, making it just $12 per year with auto-renewal.
Max out contributions to your Roth IRA
Your contributions to a Roth IRA are after-tax, meaning your money grows in your retirement account without added taxes, and your withdrawals are tax-free if you wait until you’re at least 59 1/2 years old.
If you have an account, now is the time to fund it fully before you retire.
The maximum contribution you can make is $6,500 for 2023, with an additional $1,000 if you are over 50. Setting up a Roth IRA takes some time, but if you have one, make the best use of it.
Give to charity
It’s the perfect time of the year to give to charities and support a good cause. Doing so could help you lower your taxable income if you itemize.
Most people can deduct up to 60% of their adjusted gross income in charity donations, though how much depends on the type of organization and contribution. As always, keep records of your donations and the appropriate paperwork.
Make sure you’re using the right filing status
As you prepare for taxes early next month, it may be a good idea to review your tax filing status now to ensure it’s accurate and the most likely to reduce your taxes.
If you had a child reach the age of 18, chances are good that it could have impacted your filing status, as can getting married or divorced.
Resolve $10,000 or more of your debt
Credit card debt is suffocating. It constantly weighs on your mind and controls every choice you make. You can end up emotionally and even physically drained from it. And even though you make regular payments, it feels like you can never make any progress because of the interest.
National Debt Relief could help you resolve your credit card debt with an affordable plan that works for you. Just tell them your situation, then find out your debt relief options.
How to get National Debt Relief to help you resolve your debt: Sign up for a free debt assessment here. (Do not skip this step!) By signing up for a free assessment, National Debt Relief can assist you in settling your debt, but only if you schedule the assessment.
Consider a qualified charitable distribution
For those who are over 70 1/2 years of age and hoping to give away some of their assets, a qualified charitable distribution may help.
You can donate as much as $100,000 to a charity from your IRA using this feature. This doesn’t lead to a tax deduction but could help you meet your required minimum distribution requirements.
Beef up your health savings account
Have you established a health savings account (HSA)? You can easily set one up with your bank, credit union, or other financial institution. Once in place, fund it.
These accounts allow you to put money toward your qualified health care costs. Contributions can lower your taxable income. For 2023, you can contribute up to $3,850 for a self-only coverage plan, with an extra $1,000 if you are over 55.
Determine if you can defer your income
If you’re self-employed or do any consulting work that you’re paid for at the end of the year, consider delaying that income until next year.
You are taxed on the income in the year you are paid, not when you earn it. Deferring it until next year could reduce your taxable income.
Harvest financial losses
If you’re likely to realize capital gains this year, you can rebalance your investment portfolio and harvest any losses to offset them.
The goal here is to cash out the losing portion of your losses to apply toward your capital gains up to an equal value. Doing so could help you reduce the taxes you owe on those capital gains.
Give away your money to reduce taxes
That sounds drastic, but by using the annual gift tax exclusion, you can give away up to $17,000 to each person in a single year without it leading to a taxable gift.
This gift tax exclusion allows you to transfer funds to your heirs without paying taxes on those funds (the recipient also doesn’t pay taxes or even report the income to the IRS.)
Calculate your medical expenses
Did you have a significant hospital stay or medical procedure this year? It’s possible to deduct anything above 7.5% of your adjusted gross income for the year. That includes medical and dental expenses.
This applies in situations where you itemize your deductions. Now is a good time to add up those medical expenses and determine how much you paid out-of-pocket for medical or dental care to determine if itemizing may be ideal.
Earn cash back on everyday purchases with this rare account
Want to earn cash back on your everyday purchases without using a credit card? With the Discover®️ Cashback Debit Checking account (member FDIC), you can earn 1% cash back on up to $3,000 in debit card purchases each month!1
With no credit check to apply and no monthly fees to worry about, you can earn nearly passive income on purchases you’re making anyway — up to an extra $360 a year!
This rare checking account has other great perks too, like access to your paycheck up to 2 days early with Early Pay, no minimum deposit or monthly balance requirements, over 60K fee-free ATMs, and the ability to add cash to your account at Walmart stores nationwide.
Don’t leave money on the table — it only takes minutes to apply and it won’t impact your credit score.
Use your flexible spending account
If your employer provides a flexible spending account (FSA) that you use to reduce your health care costs or even your child care, use up those funds. These accounts are a great, pre-tax way of saving money on those expenses.
The problem is that only $610 can carry over into 2024. Make sure you use those funds now, before the end of the year, so you don’t lose them.
Take your minimum required distributions
If you're over 72, you may be required to take minimum distributions from your retirement account before the end of the year. Even if you don’t need those funds now, doing so is critical.
If you fail to take those distributions before the last day of the year, you could pay a 25% penalty on the amount you didn’t withdraw.
Determine if you qualify for the Lifetime Learning Credit
The Lifetime Learning Credit allows you to deduct the cost of post-secondary education each year. It's even available for those not seeking a degree, as long as they take a qualified course to get a job or improve their skills.
Though there are income phase-outs, if you are enrolled in qualified post-secondary education this year, this credit, worth as much as $2,000 per tax return, could be an ideal tax-lowering opportunity.
Calculate your child and dependent care costs
If you pay for childcare for a dependent under the age of 13 or you are paying for care for a spouse or dependent with mental or physical disabilities, you may qualify for a tax credit.
Typically, the credit is worth up to 35% of the costs, to as much as $3,000, depending on your income, for one child or up to $6,000 for two or more children.
Add up your lottery losses
If this wasn’t your year to win big in the lottery, but you won a bit of money, calculate your costs. You can deduct up to your winning amount if you have proof of your losses.
It takes a little legwork to find those receipts, but if you have gambling winnings and have lost just as much, it’s worth it to reduce the high costs you would pay otherwise.
Determine if you should itemize or take the standard deduction
Once you’ve worked through your taxes, including all potential deductions and credits, determine if you should take the standard deduction — which many people assume they should do — or if itemizing your taxes is a smarter money move.
The standard deduction is a flat fee, but if your deductions are more than that flat fee, it’s worth it to itemize. The standard deduction amount depends on your tax filing status, age, and other factors.
Even if you didn’t contribute as much as you wanted this year to retirement or meet other objectives, you can use this time to speak to a tax professional or financial advisor.
Create a plan to take full advantage of opportunities and help you get ahead financially. Then, start the year right with your financial health being a priority.