While tax season may seem far away, being proactive in managing your taxes year-round can significantly reduce your tax burden and provide peace of mind. By taking charge of your finances and implementing strategic tax planning, you can minimize your tax liabilities. Start your midyear tax planning journey with a clear vision of your financial goals and lessons learned from last year to make informed decisions. Here are a few strategies that can benefit you.
Know Your Tax Bracket
Familiarize yourself with your tax bracket and how your income may influence it. To ensure you maximize your tax efficiency, consider implementing strategies to reduce your taxable income and potentially avoid moving into a higher tax bracket. One effective method is to defer income and accelerate deductible expenses, which can result in substantial tax savings. Even if you are not close to reaching the top tax bracket, incorporating these techniques can still have a positive impact on your overall financial well-being.
Understand Capital Gains
With a capital gains rate of 20% for top bracket taxpayers, it’s crucial to strategize by selling depreciated investments to generate losses and offset gains effectively. This approach not only can help in minimizing tax liabilities but also boosts overall investment returns. Planning and executing these tactics and leveraging depreciated investments can be an important strategy in maximizing investment income.
Plan for Medical Expenses
Consider the range of deductible expenses associated with medical care. This encompasses health insurance premiums not deducted from pre-tax wages, long-term care, insurance premiums subject to age-based limits, medical and dental services, prescription drugs without insurance reimbursement, and mileage driven for health care purposes. By strategically planning and documenting these expenses, individuals can maximize their tax benefits and leverage available deductions effectively.
Adjust Withholding or Estimated Payments
Reassess tax withholding and estimated payments to avoid any surprises come tax season. If you found yourself owing taxes in the previous year, it might be wise to update your Form W-4. The IRS’s Tax Withholding Estimator is a valuable tool that can assist you in this process. Additionally, for those who make estimated tax payments, a review of your 2023 tax situation is recommended to guarantee you are not underpaying or overpaying. Stay proactive and ensure your tax payments align with your financial circumstances for a smoother tax filing experience.
Make Retirement Plan Contributions
Be sure if you haven not, set up or contribute to retirement plans such as 401k, SEP-IRA, or SIMPLE IRA to reduce taxable income and assist in building a secure financial future through savings for retirement. By exploring these options, individuals can benefit from tax savings while ensuring a stable and comfortable retirement.
Leverage the QBI Deduction
This deduction allows pass-through entity owners to potentially deduct up to 20% of their QBI, offering a valuable opportunity for tax optimization. It’s available for individuals, including pass-through entity owners, trusts, and estates. The QBI deduction extends to income from qualified real estate investment trust dividends and publicly traded partnerships. Ensure you capitalize on this deduction to optimize your tax strategy and maximize your savings.
Proactive tax planning can lead to significant savings and better financial outcomes. Call the office and speak to Brittany to schedule your Tax Planning appointment.
Contact us at (512) 291-9955 or email info@jeaninecpa.com.
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