6 Tax Savings Tips

For Tax Season

Effective tax planning should always

be done before the new year kicks

in.

Implement your tax strategies before

the end of the year in order to

receive benefits for the year.

Here we’ll discuss some tax saving tips that you can utilize to

ensure that you are all prepped up for the new year.

1. Boost Retirement

Plan Contributions

• Taxpayers can save up to $18,000 in their 401(k)

plan.

• Those over the age of 50 can add another $6,000 for a total of $24,000.

• While pre-tax contributions reduce taxable income,

after-tax Roth 401(k) contributions tend to be more

advantageous.

2. Double Check

Minimum Distributions

• The IRS requires that RMDs are withdrawn by December 31 of each year for retirement

account holders reaching age 72.

• IRS levies a harsh 50% penalty for those who fail

to take an RMD, so double check that the

distributions are correct.

• If you miss RMD, you can fill Form 5329 to waive

the penalty if you can show a reasonable cause of error.

3. Review Tax

Withholdings

• Estimated payments of 110% of the previous year’s tax

liability can be levied depending on the

circumstances to avoid the penalty.

• Reviewing Publication 505 (Tax Withholding and

Estimated Tax) gives more information on this subject.

4. Donating to

Charity

• Financially helping charities is an effective way of reducing your tax liability. You will have to file form 1040

in order to claim the deduction benefit.

• For donations of non cash gifts greater that $500, form 8283 should be filed.

• However, be careful as donating appreciated assets that

have been held for less than a year can end up in your deduction being limited to the original investment.

5. Tax gain/loss

harvesting

• Tax loss harvesting allows up to $3,000 per year in losses to be written off. However, keep in mind the IRS prevents

making a loss claim if a substantially identical property is

bought within 30 days of the sale.

• If your taxable income is $74,900 or less ( for married

couple filing jointly) or $37,450 ( individuals), you may be

allowed for the 0 percent long-term capital gain rate for

assets held greater than a year.

6. Accelerate

Deductions

• Certain payments can be accelerated so that they

can be made to waive off tax liability.

• However, accelerating deductions can also subject you the alternative minimum tax so its advisable to

be extra careful and consult your tax advisor before

making a decision.

The best tax planning is not a fixed

regime. Each individual is unique and

so is their tax planning.

Speak to your financial and tax

advisors to find out what's the best

strategy that is suitable for you and

your financial success.

Wrapping it up

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References:

7 year-end tax tips |New Jersey.com

How to Get a Head Start on Preparing for This Tax

Season | Ace Cloud Hosting

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