What financial decisions you make between now and the end of the year could impact the amount of tax you have to pay next spring. This is especially true if retirement planning, itemizing deductions, and holding investments in an account other than a retirement account.
But time is short. After we ring, it will be okay to lower your tax bill. Get started by checking out our list!
End-Of-Year Tax Tips to Help Save
The Holidays will soon be upon us, along with the end of the year and tax season. Here are some key tips for saving time and money on taxes.
It's never too early to start tax preparation as tax season rapidly approaches. We get that holidays are coming up, and you want to avoid considering a tax strategy.
However, by strategizing around the tax profile of your business, you can find year-end strategies that can reduce your tax bill significantly and even pay some of the credit card debt you have been accruing this holiday season.
Below, we cover the end of year tax tips that you can save thousands by being a bit more organized. Starting with simple strategies, we then move to the more complex ones.
#1 Defer Income
You can reduce your tax bill by deferring income until the new tax year, an old tax planning strategy. This method is useful if your tax bracket is rising or if there are large contracts that were signed at the end of the year that can be delayed.
If you defer your income to the next fiscal year, the revenue will be recorded in that tax period. This is an intentional decision that you should make. You are effectively "kicking down the road", leaving income to be dealt with.
It is important that you are aware of your income expectations for the following year. If your income forecasts for the next year are not accurate, it is possible to have paid more in the past two years if you are in a higher tax bracket. However, if you have a situation where your income is less, this strategy can be advantageous because you will receive the income at lower rates. You can keep track of these types of tradeoffs by going back a year and comparing the profit and loss reports.
Clients sometimes defer income, sending invoices in January instead December or holding on to the checks until next year.
Not only are you required to report your numbers in cash, but this strategy can also be used.
#2 Accelerate deductions
Businesses know that increasing tax deductions will reduce your taxable income. Many business owners neglect to evaluate their tax deductions throughout an entire year as part of a comprehensive plan for tax planning. It's important not to go overboard. You also don't want any deductions that are higher than the industry standard. Otherwise, you risk getting audited.
#3 Contribute To Your Retirement
Contributing to your retirement funds is one of the most important tax tips we can offer for the end of the year. Contributing toward your retirement is one thing you can do to help your financial future and your tax situation.
#4 Invest In Career Training
The tax deductions for educational expenses and career advancement are tax-deductible. Therefore, it is a good idea if you plan to attend a seminar or take a class on business topics. Or, better yet, schedule the seminar/class before the year ends to take advantage of additional tax deductions.